Shell announced higher-than-expected profits for the first three months of 2023, continuing a positive winning streak after energy prices surged last year due to the Russian war against Ukraine.
Quarterly earnings benefited from higher oil and gas prices, a boost in refining profits, and excellent performance from its trading division.Shell Continues to Grow as Energy Prices Rise
Shell CEO Wael Sawan said that the oil giant “delivered strong results and robust operational performance, against a backdrop of ongoing volatility, while continuing to provide vital supplies of secure energy.”The positive results come after its British rival, BP, beat its first-quarter profit expectations, led by robust oil and gas trading.
However, BP shares slid on the news that it would cut down on its share buybacks.
In contrast, Shell said it was able to maintain its share-buyback program rate at $4 billion into the second quarter due to a surplus of cash, keeping its dividend unchanged at $0.2875 per share.
The big five oil giants were able to break all previous annual profit records last year due to volatile oil and gas prices after the war in Ukraine began in February 2022.
Shell said strong results from fuel trading and optimization offset the impact of weaker oil and gas prices in the first three months of the year.
Company-adjusted earnings from refining and marketing oil products rose to $1.17 billion, after a loss of $130 million in the fourth quarter from a net profit of $781 million in 2022, while oil volumes fell to around 1.6 million barrels per day from 1.9 million bpd.
The energy giant said that improved operational performance and lower day-to-day business costs were a contributing factor to the positive results in the first quarter.
As the world’s largest trader of liquefied natural gas (LNG), the energy firm reported that sales of the fuel rose by 9 percent in the quarter, to 18.3 million tonnes, as Europe becomes heavily reliant on the energy source since the loss of Russian natural gas.
TotalEnergies, ExxonMobil, Chevron, BP, and Shell reported a combined record profit of $153.5 billion in 2022, and appear on track for another record year in 2023.
Big Oil Faces Pressure From Green Policies and Windfall Taxes
Meanwhile, political pressure is leading to oil companies making pledges to cut back on coal, oil, and gas production in favor of so-called “clean energy.”
Still, last year’s scramble for energy sources showed that oil and gas demand will continue to persist for years, even if green energy becomes widely available.
Shell, which has promised to become a net-zero emissions business by 2050, reported first-quarter adjusted earnings of $389 million for its Renewable and Energy Solutions unit, from $293 million in the fourth quarter.
Domestic British politics have come into play after the opposition Labour Party’s criticism of the energy industry’s recent profits, which have led to calls to raise the windfall tax as people struggle to pay their energy bills due to high inflation.
Energy companies in the United Kingdom have been paying millions under a 25 percent windfall tax since 2022 to subsidize household energy bills until March 2028.The ruling Conservative government has rejected the idea of an increase, noting that it would discourage energy companies from investing in the transition to low-carbon energy.
Oil executives have been emphasizing to the public the importance of energy security in the transition toward a green economy and by suggesting that higher taxes could deter investment.
