Shell H1 23 – 27/07
oil companies have continued to remain at the forefront of politician's ire, even as oil and gas prices have slipped back from the record highs we saw during the middle of last year.
With new CEO Wael Sarwan striking a much more belligerent as well as pragmatic tone when it comes to Shell's production targets there is a sense that big oil has become less cowed by the political discourse over renewables as well as the threats of higher taxation that has seen the size of their tax take go up. In Q1 Shell reported a much better than expected set of profits of $9.6bn, only a modest decline from Q4's $9.8bn, on revenues of $86.96bn.
This is well above the same quarter last year, with integrated gas contributing $4.9bn to the overall profit numbers, a $1.1bn decline from Q4, but still the second highest number ever.
Shell also maintained its dividend at 28.75c a share and announced another $4bn share buyback for the quarter. Other key areas of outperformance were in chemicals and products which saw a big jump in profits of over $1bn to $1.78bn, primarily due to a big jump in margins. Renewables and energy solutions saw profits rise to $400m, from $300m in Q4.
On the tax front Shell paid $3.1bn during the quarter although there was no detail as to how this was broken down. In June Shell announced that they would be increasing the dividend by 15% as well as spending another $5bn in share buybacks during H2 of 2023. Shell also said it was planning to invest $10-15 billion across 2023 to 2025 to support the development of low-carbon energy solutions including biofuels, hydrogen, electric vehicle charging and CCS.
New CEO Wael Sarwan also pushed back on the narrative of renewables at any cost, saying that "We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonisation of the global energy system.
We will invest in the models that work – those with the highest returns that play to our strengths" in a broadside at the some of the recent reckless narrative and almost hysterical calls to cut back on fossil fuel use whatever the cost.
Spending on capex would be reduced to $22bn-$25bn for 2024/2025, with an enhanced focus on performance, and discipline. In a recent trading update Shell said that it expects Q2 trading to be weaker as lower demand and lower prices impacts on its operations. Shell also said that its chemicals division is likely to make a loss during the quarter.
