Oil and gas prices drive Shell profits to eight-year high

Shell again boosted its dividend and share repurchases on Thursday after fourth quarter profits hit their highest in eight years, fuelled by higher oil and gas prices and strong gas trading performance.

The strong results cap a year of dramatic recovery for Shell and the oil and gas sector after energy demand and prices collapsed in 2020 in the wake of the coronavirus epidemic.

Shell said it expected to increase its dividend by 4 per cent in the first quarter of 2022 to $0.25 per share. This will mark the fourth dividend increase since Shell cut its dividend in early 2020 for the first time since the 1940s.

The company also announced it will buy back $8.5 billion worth of shares in the first half of 2022, including $5.5 billion from the sale of its Permian shale assets in the United States.

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That compares with share buybacks totalling $3.5 billion in 2021.

“[The year] 2021 was a momentous [one] for Shell,” said chief executive Ben van Beurden. Natural gas and electricity prices worldwide have soared since the middle of last year on tight gas supplies and higher demand as economies rebounded from the pandemic.

Benchmark European gas prices and Asian liquified natural gas prices hit all-time highs in the fourth quarter.

Gas supply

Mr Van Beurden also said that Shell would step in to help supply Europe with gas in case of Russian disruptions.

US rival Exxon Mobil on Tuesday reported its largest profit in seven years and said it planned to boost domestic production by 25 per cent this year. Chevron's profit missed estimates. BP, TotalEnergies and Equinor report results next week.

Shell earlier this month officially ditched “Royal Dutch” from its name and merged its dually listed shares after moving its head office from The Hague to London as part of a tax and structure simplification drive, which Mr van Beurden said would help the company plan to grow its low-carbon business.

Fourth-quarter 2021 adjusted earnings rose by 55 per cent from the previous quarter to $6.4 billion, well above an average analyst forecast. That compares with earnings of $393 million a year earlier.

For the year, Shell’s adjusted earnings rose to $19.3 billion, compared with $4.85 billion in 2020.

Net debt dropped sharply throughout the year to $52.55 billion from $75.4 billion at the end of 2020. Shell’s debt-to-capital ratio, or gearing, dropped to 23.1 per cent from 32.2 per cent over the same period. – Reuters