Shell doubles profit in 2022 to record-breaking $40 billion

UK-headquartered energy giant Shell recorded the highest-ever profit on a year-on-year basis last year, reaching nearly $40 billion, which surpassed its previous annual record of $28.4 billion in 2008. In addition, the record-high profit from 2022 is more than double the firm’s full-year 2021 profit of $19.29 billion.

As quarterly and full-year results come in from oil majors like Shell and energy players, they all show that energy companies have raked in bumper profits during 2022, thanks to elevated energy prices, increased demand for higher oil and gas production and tight supply. This was also confirmed by Shell’s U.S. counterparts – Chevron and ExxonMobil – which posted all-time high profits of $35.5 billion and $55.7 billion, respectively.

Shell disclosed on Thursday, 2 February 2023, that the income attributable to its shareholders in the fourth quarter of 2022 totalled $10.4 billion compared to $6.7 billion in the third quarter of 2022 and compared to $11.45 billion in 4Q 2021. Compared with the third quarter of 2022, the increase in 4Q 2022 mainly reflected higher LNG trading and optimisation results, and favourable deferred tax movements, partly offset by lower realised oil and gas prices, and higher operating expenses.

In addition, Shell outlined that the income attributable to its shareholders included net gains of $4.2 billion in 4Q 2022 due to the fair value accounting of commodity derivatives, partly offset by charges of $1.9 billion related to the EU solidarity contribution and the UK Energy Profits Levy, and impairment charges of $0.7 billion.

On the other hand, the full-year 2022 income attributable to Shell’s shareholders of $42.3 billion, compared with $20.1 billion for the full-year 2021, reflected higher realised prices, higher refining margins, and higher trading and optimisation results – mainly related to Integrated Gas, Chemicals and Products and Renewables and Energy Solutions – partly offset by lower volumes, and lower chemicals margins.

Additionally, this included net gains of $3.4 billion due to the fair value accounting of commodity derivatives, charges of $2.3 billion related to the EU solidarity contribution and the UK Energy Profits Levy, and net impairment reversals of $0.7 billion. These gains and losses are included in identified items amounting to a net gain of $1.2 billion in the full-year 2022. Shell highlighted that this compares with identified items in the full-year 2021 which amounted to a net charge of $2.2 billion.

Wael Sawan, Shell’s Chief Executive Officer, commented: “Our results in 4Q and across the full year demonstrate the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world. We believe that Shell is well positioned to be the trusted partner through the energy transition.

“As we continue to put our Powering Progress strategy into action, we will build on our core strengths, further simplify the organisation and focus on performance. We intend to remain disciplined while delivering compelling shareholder returns, as demonstrated by the 15 per cent dividend increase and the $4 billion share buyback programme announced today.”

Furthermore, the company’s adjusted earnings in 4Q 2022 – driven by the same factors as income attributable to Shell shareholders – were $9.8 billion compared to $9.5 billion in the previous quarter and compared to $6.4 billion in 4Q 2021.

Shell’s adjusted earnings of $39.9 billion for the full-year 2022, compared with $19.3 billion for the full-year 2021, were driven by the same factors as the income attributable to the firm’s shareholders and adjusted for identified items and the cost of supplies adjustment of negative $1.2 billion.

The oil major’s cash flow from operating activities for the fourth quarter of 2022 was $22.4 billion, compared to $12.54 billion in 3Q 2022 and $8.2 billion in 4Q 2021. The company says that this included working capital inflows of $10.4 billion, and tax payments of $4.4 billion. The working capital inflows were mainly driven by higher initial margin inflows, lower prices on crude inventories, a decrease in accounts receivable, and cash relating to joint ventures.

The UK giant’s cash from operating activities for the full-year 2022 was $68.4 billion, compared to $45.1 billion for the full-year 2021. This reflected working capital outflows of $5.4 billion and tax payments of $13.1 billion.

Furthermore, the firm’s cash flow from investing activities for the fourth quarter of 2022 was an outflow of $6.9 billion and included capital expenditure of $6.4 billion while the cash flow from investing activities for the full-year 2022 was an outflow of $22.4 billion and included capital expenditure of $22.6 billion.

At the end of the fourth quarter of 2022, Shell’s net debt was $44.8 billion, compared with $48.3 billion at the end of the third quarter of 2022 and $52.56 billion at the end of 4Q 2021, mainly reflecting higher free cash flow.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

Moreover, Shell’s gearing was 18.9 per cent at the end of the fourth quarter of 2022, compared with 20.3 per cent at the end of the third quarter of 2022 and 23.1 per cent at the end of the fourth quarter of 2021, driven by net debt reduction and higher income which resulted in higher equity.

The UK-headquartered player also highlighted that shareholder distributions in 4Q 2022 amounted to $6.3 billion, compared to $6.8 billion in the previous quarter. Shell also announced a share buyback programme of $4 billion. This is expected to be completed by the first quarter of the 2023 results announcement.

Shell’s total oil and gas production in the fourth quarter of 2022 was higher than in 3Q 2022, mainly due to lower scheduled maintenance and lower unscheduled deferment. On the other hand, the oil major’s total oil and gas production for the full-year 2022 decreased compared with the full-year 2021 due to the impact of divestments and scheduled maintenance. However, the impact of field decline was more than offset by growth from new fields.

Greenpeace reported earlier this week that Shell was likely to face further pressure after its full-year profits announcement, as it had already made “eye-watering profits off the back of inflated energy prices, driven up by Putin’s war in Ukraine.” The environmental group said this after its activists boarded Boskalis’ semi-submersible heavy transport vessel, transporting Shell’s Penguins FPSO destined for the Penguins oil and gas project off the UK.

After the oil major posted record annual profits of £32.2 billion or $39.9 billion, Greenpeace UK revealed that Shell’s headquarters were targeted by its activists, who set up a huge, mock petrol station price board outside the company’s London HQ. The 10-foot board displays the £32.2 billion Shell made in profits in 2022, with a question mark next to the amount it will pay towards climate loss and damage. The group says that its campaigners are calling on Shell to take responsibility for “its historic role in the climate crisis and pay for the devastation it causes around the world.”

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

Commenting on Shell’s 2022 profits, Elena Polisano, senior climate justice campaigner for Greenpeace UK, said: “Shell is profiteering from climate destruction and immense human suffering. While Shell counts their record-breaking billions, people across the globe count the damage from the record-breaking droughts, heatwaves and floods this oil giant is fuelling. This is the stark reality of climate injustice, and we must end it.

“World leaders have just set up a new fund to pay for the loss and damage caused by the climate crisis. Now they should force historical mega polluters like Shell to pay into it. It’s time to make polluters pay. If they had pivoted their business and transitioned away from fossil fuels sooner, we wouldn’t be in such a deep crisis. It’s time for them to stop drilling and start paying.”

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

Greenpeace claims that Shell has funnelled billions back into shareholder pockets in the form of buybacks, instead of investing its profits back into “clean, cheap renewable power which could alleviate bills, shore up UK energy security, and ease the climate crisis.” The environmental group emphasised that the oil major invested just 6.3 per cent of its £17.1 billion profits into low-carbon energy in the first six months of 2022 while it invested nearly three times more in oil and gas.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

Jonathan Noronha-Gant, Global Witness, Senior Campaigner, said: “People have every right to be outraged at the enormous profits that Shell has made in the midst of an energy affordability crisis that has pushed millions of families into poverty. For those facing exorbitant energy bills, and for all of our nurses, firefighters and teachers on the picket line this week, Shell’s profits are an insult. Shell is richer because we’re poorer.

“If oil and gas companies were properly taxed, and if our government stopped handing them billions of pounds in the form of tax breaks and other subsidies – then that would free up the money that’s desperately needed to give Brits long-term support with the cost of their energy bills, and to give our key workers the financial recognition they deserve. But so far that hasn’t happened.” 

Meanwhile, Global Witness, an international NGO, disclosed on Wednesday, 1 February 2023, that Shell was another oil and gas major “greenwashing its investments in fossil fuels.” The NGO underlines that while the UK giant claims to spend 12 per cent of its expenditure on Renewables and Energy Solutions, in reality, the company only spends 1.5 per cent of its expenditure on solar and wind power generation.

As a result, Global Witness claims that it has submitted a complaint to the U.S. financial regulator, the Securities and Exchanges Commission (SEC), accusing Shell of lumping together some of its gas-related investments with its spending on renewables to inflate its overall investment in renewable sources of energy.

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

Zorka Milin, Senior Advisor at Global Witness, stated: “Shell does not disclose how much it spends on fossil gas activities that it tells investors are ‘renewables’ or ‘energy solutions,’ but gas plays a role in the majority of investments included under that label. You heard us right: Shell is counting some of its investments in fossil gas as spending on Renewables and Energy Solutions.

“This type of greenwashing must stop. Gas is not renewable nor is it clean energy. Gas is destroying the planet and accelerating climate breakdown. This is why we’ve filed a groundbreaking complaint with U.S. authorities accusing Shell of misleading investors on its energy transition investments.”

This content is available after accepting the cookies.

Change cookie-settings View on Twitter.

“We need an equitable and just transition to renewable energy, that’s why Global Witness calls on the SEC to investigate Shell’s greenwashing of its fossil gas investments to determine if Shell violated relevant U.S. securities laws, and if appropriate, to impose fines and to prohibit Shell from further violations,” outlined Global Witness in its statement.

In response to claims in this complaint, Global Witness confirmed that a Shell representative underscored: “Shell is confident that its financial disclosures are fully compliant with all SEC and other reporting requirements.” The spokesperson also pointed to disclosures in recent quarterly and annual reports in which Renewables and Energy Solutions is defined as including gas-related activities.

Follow Offshore Energy’s Fossil Energy market on social media channels: