Shell’s Profits Hit $9.6 Billion Despite ‘Volatile Market’

A man reaches for an unleaded petrol nozzle at a Shell fuel station near Basingstoke in England on Jan. 20, 2016. Adrian Dennis/AFP via Getty Images

British energy giant Shell has published its first-quarter profits, reporting adjusted earnings of $9.6 billion. The company achieved the results despite an “unfavourable” tax climate and “lower realised oil and gas prices.”

Shell announced on May 4 that its numbers are $500 million higher than the same period last year. The company’s adjusted earnings for the first three months of 2023 are $1.7 billion greater than forecast.

Shell CFO Sinead Gorman welcomed the stronger-than-expected profit, saying in a statement (pdf) that “strong results were underpinned by robust performance.”

“We delivered strong results, significant shareholder returns, and continued to high-grade the portfolio, while navigating a volatile market,” Gorman said.

The company has delivered $14.2 billion of cash flow from operations.

Gorman praised the company’s performance in Australia, at Pearl gas-to-liquids plant in Qatar, and “strong trading and optimisation results.”

“We also played an important role in securing gas supplies for Europe this past winter by storing 50 percent more gas than the previous year,” Gorman added.

‘Unfavourable’ Conditions

While Shell enjoyed adjusted earnings of $9.6 billion in 2023, the figure was smaller compared to $9.8 billion in the last quarter of 2022.

Shell said the slight drop in profits “mainly reflected unfavourable tax movements, and lower realised oil and gas prices, partly offset by lower operating expenses and higher Chemicals and Products trading and optimisation results.”

Similar to other energy market players, Shell has faced a period of market volatility and uncertainty over the past year. The energy market has seen volatile changes in pricing and energy supply, as well as shifts in production volume in light of the decision to cut production by the OPEC+ group of leading oil producers.

The surge in prices for oil and gas owing to the war in Ukraine has boosted the profits of energy companies. In response to exceptionally high prices “that mean oil and gas companies are benefitting from extraordinary profits,” the UK government introduced the Energy (Oil and Gas) Profits Levy in May 2022.

According to the new tax, oil and gas companies that operate in the UK or on the UK Continental Shelf are subject to the windfall tax until March 2028. BP, Shell, and Centrica have all reported paying millions under the levy since its introduction.

Like Shell, British energy giant BP has also announced strong first-quarter results, hitting a record-high $5 billion in underlying replacement cost profit.

Unlike BP, who suffered a reduction from the $6.2 billion in the same quarter last year, Shell reported higher results compared to the same period in 2022.

“Our Integrated Gas business performed very well, with improved utilisation,” Gorman said.

Shares and Investment

She also announced that Shell will be returning $4 billion to shareholders, by buying back some of its shares over the second quarter of the year. According to Gorman, this would “bring our expected shareholder distributions for the first half of the year to around $12 billion.”

“This demonstrates our commitment to generating attractive shareholder returns,” Gorman added.

In its report, Shell also pledged to continue making disciplined investments to upgrade its portfolio. The company has invested in its newest offshore platform in the Gulf of Mexico with an estimated peak production of 100,000 barrels of oil a day.

In the UK, Shell has restarted operations at its Pierce field, east of Aberdeen, Scotland, “following a significant upgrade to allow gas to be produced.”

Shell, BP, and other energy companies face criticism for benefitting from high prices and reaping record profits at a time when consumers are left with unusually high energy bills, unable to afford heating during the cold winter months.

The UK government introduced the Energy Price Guarantee in 2019 to protect consumers from increases in energy costs by limiting the amount suppliers can charge per unit of energy used.

The EPG has recently been extended for an additional three months to the end of June, aiming to bring a typical household energy bill for dual-fuel gas and electricity down to around £2,500 per year in Great Britain and around £2,109 per year in Northern Ireland.