Shell under the spotlight in the City after record-breaking profit
The doubling of Shell’s annual profit to a new record left the UK’s largest company facing scrutiny in the City today about its future strategy and the scale of its plan to return cash to investors.
The energy giant pledged to return return $4 billion to investors via a share buyback. The 115-year old company also lifted its dividend payout by 15%, after its annual earnings powered through forecasts to a new record and one of the biggest profits ever seen in the UK at £32 billion.
Shell’s numbers came at the end of a year marked by Russia’s invasion of Ukraine, leaving gas prices around elevated levels. Chief executive, Wael Sawan, who took up his appointment at the start of 2023, said the results “demonstrate the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world.”
Earnings in the fourth quarter alone came in at over £8 billion, up by over 50% and significantly more than expected, with the gas business responsible for around two thirds of the profit. That includes Shell’s major liquified natural gas business, with LNG one of the main alternative fuels to gas piped into Europe from Russia, demand for which soared as European countries scrambled to boost their storage capacities after the invasion, to reduce dependence on imports from Moscow.
Attention in the City turned to the implications of Shell’s vast earnings, and the energy giant’s strategy for the future, not least in the context of the world’s long-term move away from fossil fuels.
James Hughes, chief analyst at Scope Markets, said: “The oil giant certainly delivered for the City and the market today. But the scale of its plans to return capital runs the risk of making existing windfall taxes look like little more than virtual signalling. Shareholders may be appeased, but it is likely to be a different story from taxpayers.”
Shell’s shares rose 23p to 2389p today, a rise of 1%. Over the past year, they are up by about a quarter.
Stuart Lamont, investment manager at wealth manager RBC Brewin Dolphin, said: “The politics of it all aside, the events of the last year have seen Shell’s earnings, cashflow, and debt position improve significantly and shareholders are benefitting.
“Looking ahead, investors will want a sense of what the future strategic direction of the company will be under the new CEO.”
Shell has faced criticism over its transparency over its spending on renewable energy. Its claims that up to a third of its capital outlay relates to moves toward greener alternatives have been attacked by lobbying groups.
Neil Shah, at investment research firm Edison Group said Shell’s results showed that “despite global demand for renewable energy, the cogs continue to turn steadily on the well-oiled machine of the petroleum industry.”
