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FTSE 100: Shell raises dividend as profits double to $9.5bn amid energy crisis

Shell profits soared in the third quarter despite falling oil prices. Photo: Astrid Vellguth/AFP via Getty
Shell profits soared in the third quarter despite falling oil prices. Photo: Astrid Vellguth/AFP via Getty

Shell (SHEL.L) announced a $4bn (£3.4bn) share buyback programme and higher dividend payments for shareholders after posting bumper profits amid the energy crisis.

The FTSE 100 (^FTSE) firm reported a "robust performance in a turbulent economic environment" despite lower crude prices and higher gas prices compared with the second quarter this year.

Shell's adjusted earnings figure of $9.5bn in the third quarter was more than double the $4.13bn it recorded a year ago, but down on the record $11.5bn in Q2.

Europe's largest energy group beat the average analyst estimate of $9bn after cashing in on selling expensive gas, offsetting part of the fall in oil prices.

Thursday's results were the second highest quarterly profits in the company’s history.

Read more: Shell and BP windfall tax on share buyback profits could raise $4.8bn

Shell will increase its dividend by 15% and buy back a further $4bn of shares as it reported another set of bumper profits driven by sustained high prices for its oil and gas products.

The additional buybacks lift total share purchases for the year to $18.5bn, taking announced shareholder distributions for 2022 to around $26bn, Shell said.

Payment will be made in March 2023, subject to board approval, the company added.

"We are delivering robust results at a time of ongoing volatility in global energy markets," chief executive Ben van Beurden said. "We continue to strengthen Shell’s portfolio through disciplined investment and transform the company for a low-carbon future."

Wael Sawan, head of Shell’s renewables and gas business, will replace van Beurden as CEO from 1 January 2023, when the Dutchman's nine-year stint at the helm will end.

Company shares were up 5.4% in early trade on Thursday in London.

“Given it now plans to reward shareholders with a windfall of their own through its pledge to increase the fourth quarter dividend, calls for a further levy on Shell’s bumper profits are only likely to increase," Laith Khalaf, AJ Bell head of investment analysis, said.

“In fairness, chief executive Ben van Beurden has been self-aware enough to acknowledge this fact and he could argue he has to reward shareholders who, after all, saw the first cut in the dividend since the Second World War during the pandemic.

“The optics of paying out more to investors aren’t too clever when many households are really struggling with their energy bills," he added.

Climate experts have criticised the results, saying the billions made in Q1 and Q2 by all fossil fuel giants could have generated enough cash to insulate thousands of homes.

Charlie Kronick, senior climate advisor at Greenpeace UK, said: "While Shell continues to bank billions, how many more households need to be forced into fuel poverty before the government wakes up: the only way to address the interlocking cost of living, energy security and climate crises is a street by street rollout of home insulation combined with a massive lift in ambition for renewable energy. These solutions would lower peoples’ bills permanently."

Shell faces a potential windfall tax on profits on top of the 65% tax on their UK profits, and the outgoing CEO has suggested governments should tax energy firms to help the poorest people deal with soaring bills.

The "likes of Shell are treating families like cash machines", said Trades Union Congress general secretary Frances O'Grady.

"These profits are obscene — especially at a time when millions are struggling with soaring bills," O'Grady added. "The government has run out of excuses. It must impose a higher windfall tax on oil and gas companies."

A separate report, published on Thursday, suggested that a windfall tax on share buyback profit transferred by Shell and rival BP (BP.L) to shareholders could raise £4.8bn ($5.6bn) a year.

The funds could help tackle rampant inflation and households as the cost of living surging, according to thinks tanks Institute for Public Policy Research (IPPR) and Common Wealth.

Read more: Shell boss calls for windfall tax on energy firms to help people with rising bills

Joseph Evans, researcher at IPPR, said: "Some companies have been channelling record profits to their shareholders. It would be only fair, during this cost of living crisis, to implement a modest tax on dividends and buybacks to give the government increased revenue to fund our public services.

"The introduction of such a tax would also encourage companies to change their behaviour: instead of taking money out of their business and handing it to shareholders, they might consider investing in the future to grow the economy, or reduce prices for customers to help tackle inflation."

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