- 2022 adjusted earnings close to $40 billion
- UK energy profit levy makes little impact
- New share buyback and final dividend raised
Energy giant Shell (SHEL) reported record fourth-quarter and full-year profits, ahead of market forecasts, thanks to a strong performance from its LNG (liquefied natural gas) division.
The shares gained 2.3% to £24.21, continuing their positive recent trend.
For the three months to December, the company posted adjusted earnings of $9.8 billion compared $6.4 billion the previous year, while for the full 12 months adjusted earnings were $39.9 billion, more than double the previous year’s figure of $19.3 billion.
The results were driven mainly by higher LNG activity which offset lower realised oil and gas prices, as well as favourable deferred tax movements.
The fourth quarter was also helped by net gains of $4.2 billion from the fair value accounting of commodity derivatives, partly offset by $1.9 billion of charges including an amount for the UK Energy Profits Levy and $0.7 billion of impairments.
The full-year result of almost $40 billion in profits far exceeds the firm’s previous record of $31 billion back in 2008 and demonstrates Shell's ‘capacity to deliver vital energy to our customers in a volatile world’ according to new chief executive Wael Sawan.
Sawan, a 25-year veteran of the firm, previously headed up its integrated gas, renewables and energy solutions business, and his appointment is seen as part of Shell’s strategy to take what it describes as a ‘leading role in the energy transition’.
CAPITAL ALLOCATION
Cash flow from operations hit $22.4 billion in the fourth quarter, up nearly 80% on the third quarter and close to three times the level of the previous year, while capex and investments totalled $6.9 billion leaving free cash flow for the quarter at $15.5 billion.
As oil companies scale back their investment in exploring for new sources of oil and gas and streamline their existing operations with asset sales, there is more cash to hand back to shareholders.
Having disappointed investors during the Covid pandemic by ‘rebasing’ its dividend at a lower level, the firm is now making amends with a 15% hike in the fourth-quarter payment to 29c and a $4 billion share buyback.
That lifts the total dividend payout for the year to $1.04 against 89c and takes total shareholder returns to $26 billion or more than 35% of cash flow from operations.
