Shell reported its highest quarterly earnings since 2008, profiting from the instability in global energy markets due to the Ukraine-Russia crisis.
Adjusted earnings at Shell increased to $9.1 billion in the first three months of the year, nearly tripling the $3.2 billion reported the previous year. This topped the expert consensus of $8.7 billion and increased from $6.4 billion in the last three months of 2021.
“The war in Ukraine is first and foremost a human tragedy, but it has also caused significant disruption to global energy markets and has shown that secure, reliable and affordable energy simply cannot be taken for granted,” said Shell chief executive Ben van Beurden.
Shell’s revenues were powered by its oil production and integrated gas operations, which earned $4.1 billion and $3.5 billion in adjusted earnings, respectively, and a good performance from its traders.
Shell is the world’s largest liquefied natural gas dealer and a massive oil trader. LNG prices have risen sharply as European initiatives to reduce reliance on piped gas from Russia have intensified competition for fuel shipments. According to the company, Shell produced 8 million tonnes of LNG in the first quarter and sold 18.3 million tonnes.
Shell’s exposure to Russia was lower than that of European competitors BP and Total. According to investment bank Jefferies, before the crisis, Russia was scheduled to contribute 5% of Shell’s total oil and gas output in 2022, compared to 16% for Total and 28% for BP.
Shell’s decision to exit its Russia business, which included a 27.5% share in the Sakhalin-2 liquefied natural gas project with Gazprom, resulted in $3.9 billion in post-tax costs, the company said.
The oil giant said it had completed $4 billion of the $8.5 billion in share buybacks scheduled for the first half of the year and that shareholder payments in the second half of 2022 would exceed 30% of cash flow from operations. The first-quarter cash flow from operations was $14.8 billion.
“The bottom line here is that Shell continues to generate operating cash flows and free cash flows well in excess of any of its peers,” said Biraj Borkhataria, an analyst at RBC Capital Markets.