Shell sees ‘robust’ profits

Business & Finance

October 27, 2022, by Melisa Čavčić

UK-headquartered energy giant Shell has recorded higher profits in the third quarter of 2022 on a year-on-year basis thanks to higher gas prices and increased volumes from deepwater assets.

Shell disclosed on Thursday that the income attributable to its shareholders in the third quarter of 2022 totalled $6.7 billion compared to $18 billion in the second quarter of 2022 and compared to a loss of $447 million in 3Q 2021.

Compared with 2Q 2022, the income attributable to the energy giant’s shareholders mainly reflected lower LNG trading and optimisation results, lower chemicals and refining margins, as well as higher underlying operating expenses, partly offset by increased volumes from higher-value barrels in deep water.

In addition, the income attributable to Shell’s shareholders included net losses of $1 billion due to the fair value accounting of commodity derivatives and impairment charges of $0.4 billion. These net losses in 3Q 2022 amount to $1.4 billion compared with a net gain of $5.2 billion in 2Q 2022.

Furthermore, the company’s adjusted earnings in 3Q 2022 – driven by the same factors as income attributable to Shell shareholders – were $9.5 billion compared to $11.5 billion in the previous quarter and compared to $4.1 billion in 3Q 2021.

Shell’s total oil and gas production in the third quarter decreased by 2 per cent from the previous quarter mainly due to “permitted industrial actions” at Prelude and production sharing contract effects, partly offset by lower maintenance activities in Trinidad and Tobago.

Additionally, total upstream production decreased in 3Q 2022 due to the derecognition of Salym in Russia and unscheduled deferments, which are partly offset by higher scheduled maintenance in the second quarter of 2022. Moreover, LNG liquefaction volumes decreased by 5 per cent in 3Q 2022 mainly due to “permitted industrial actions” at Prelude and higher maintenance activities.

Ben van Beurden, Shell’s Chief Executive Officer, commented: “We are delivering robust results at a time of ongoing volatility in global energy markets. We continue to strengthen Shell’s portfolio through disciplined investment and transform the company for a low-carbon future. At the same time, we are working closely with governments and customers to address their short and long-term energy needs.”

Shell underlines that it is working on strengthening and simplifying its asset portfolio through the energy transition with the completion of the Sprng Energy (India) acquisition, participation in the North Field South LNG expansion (Qatar), the Rosmari-Marjoram field FID (Malaysia), the announced Aera Energy divestment (California, USA) and the acquisition of Shell Midstream Partners (USA).

The UK-headquartered player highlighted that shareholder distributions in 3Q 2022 amounted to $6.8 billion. The firm also plans to increase shareholder distributions through a $4 billion share buyback programme, which is expected to be completed by 4Q 2022 results.

“We plan to increase the dividend per share (DPS) for the fourth quarter, which will be paid in March 2023, by an expected 15 per cent, subject to board approval,” outlined Beurden, who will be succeeded as CEO by Wael Sawan, effective from 1 January 2023.

Shell’s net debt was $48.3 billion at the end of the third quarter of 2022, compared with $46.4 billion at the end of the second quarter of 2022, mainly reflecting lower cash flow from operating activities and the absorption of debt from the acquisition of Sprng Energy.

Regarding its outlook for the fourth quarter of 2022, Shell expects integrated gas production to be approximately 910 – 960 thousand boe/d, upstream production of around 1,750 – 1,950 thousand boe/d, and LNG liquefaction volumes of approximately 7.0 – 7.6 million tonnes.

When it comes to Shell’s recent exploration activities, it is worth noting that the energy giant is planning to spud the Pensacola gas prospect in mid-November 2022.