Shell posts record quarterly profit, lifted by energy price surge

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The Shell logo is seen on a pump at a Shell petrol station in London January 30, 2014. REUTERS/Suzanne Plunkett

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  • Shell adjust earnings hits $9.1 billion
  • Results boosted by strong oil and gas trading
  • Retains some exposure to Russia

LONDON, May 5 (Reuters) – Shell (SHEL.L) on Thursday reported a record first-quarter profit of $9.13 billion, boosted by higher oil and gas prices, stellar refining profits and the strong performance of its trading division.

The last of the energy majors to report results, Shell joins sector rivals, including BP (BP.L) and TotalEnergies (TTEF.PA) in making big profits from the commodity price volatility stoked by Russia’s invasion of Ukraine that began on Feb. 24 read more

It beat its previous highest quarterly profits recorded in 2008 even after writing down $3.9 billion post-tax as a result of its decision to exit operations in Russia. It is also winding down oil and gas trading with Russia. read more

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Shell’s shares rose 3.3% in early trading, outperforming the 1.8% rise of an index of oil and gas companies. (.SXEP)

By the end of this year, Shell said it would stop all of its long-term Russian crude oil purchases, except two contracts with a “small, independent Russian producer” that it did not name.

Its contracts to import refined oil products from Russia will also end, it said, adding it still had running long-term contracts to buy Russian liquefied natural gas (LNG).

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Shell, the world’s largest LNG trader, said sales of the fuel rose by 9% in the quarter to 18.3 million tonnes. LNG is seen as crucial to ending Europe’s reliance on Russian pipeline gas.

The European Union’s chief executive on Wednesday proposed a phased oil embargo on Russia that, if backed by member states would be a watershed for the world’s largest trading bloc given its dependence on Russian fuel, although the bloc has yet to work on a gas ban. read more

Shell maintains $1 billion in value of Russian assets on its balance sheet, including for petroleum stations, a lubricants plant and future dividends from its stake in Sakhalin-2 LNG project, a spokesperson said.

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WINDFALLS VERSUS BUYBACKS

The size of energy companies’s profits have led to calls from Britain’s opposition Labor Party to levy a windfall tax to support people struggling to pay their energy bills because of the surge in prices.

The ruling Conservatives have rejected the idea, saying it would discourage companies from investing profits in the transition to lower carbon energy. read more

Meanwhile, Shell is providing incentives for shareholders.

It said its dividend payments and share repurchases reached $5.4 billion in the quarter, part of its plan to buy back $8.5 billion shares in the first half of the year.

Its dividend rose to 25 cents per share as planned.

In the current environment, it said it expects shareholder distributions to exceed 30% of cashflow in the second half.

First-quarter adjusted earnings rose 43% from the previous quarter to $9.13 billion, above an average analyst forecast provided by the company for a $8.67 billion profit.

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That compares with earnings of $3.23 billion a year earlier.

Shell’s adjusted earnings from refining and marketing oil products leapt to $1.17 billion from a loss of $130 million in the previous quarter and a profit of $781 million last year despite volumes falling to around 1.6 million bpd from 1.9 million.

Shell’s quarterly cashflow of $14.815 billion was hit by outflows of $7.4 billion as a result of changes in the value of oil and gas inventories.

Still, the surge in revenue allowed Shell to cut its debt burden to $48.5 billion from $52.6 billion at the end of 2021.

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Reporting by Ron Bousso and Shadia Nasralla Editing by David Goodman and Barbara Lewis

Our Standards: The Thomson Reuters Trust Principles.

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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