Shell profits expected to dip from recent highs after gas price drop

New chief executive Wael Sawan is unlikely to be introduced to shareholders alongside another set of record profits, but Shell will have continued to benefit from massively high energy prices in the last months of 2022.

Perhaps more than anything, investors will be looking for any guidance that Shell has on what the next year will look like.

That, however, might be the area where the company is most at the whims of global politics, just like it was last year.

When Mr Sawan’s predecessor Ben van Beurden presented the same set of results 12 months ago, energy prices were already high.

But the bumper year that Mr Sawan will wrap up when he presents the fourth quarter and full year results on Thursday were largely influenced by events a month later, when Russian tanks once again rolled over Ukrainian borders.

The escalation in the war – which has been going since 2014 – and the economic war that broke out between Russia and Ukraine’s allies, pushed up oil and gas prices.

Unsurprisingly, this was good news for Shell, Europe’s biggest oil major. The company’s preferred measure of adjusted earnings, which strips out several costs, had been around £16 billion between October and December 2021.

But it rocketed to as much as £23 billion in the second quarter of last year, a record high.

Not even the most optimistic analysts expect Shell to get close to this figure in the fourth quarter results. Gas and oil prices have dropped enough to shave around £4 billion off the quarterly result, they believe, according to an average of the forecasts.

Susannah Streeter, senior investments and markets analyst at Hargreaves Lansdown, said: “Oil prices are hovering around 86 dollars a barrel, well down from the spikes to above 120 dollars last summer, Shell’s profits won’t be pouring in at quite the same bumper rate.

“However, energy prices are still elevated by historical standards and so these are still buoyant times for the energy giant.”

Staff of Shell Energy – the company’s retail arm which supplies gas, electricity and broadband to households – might also hope for a look behind the curtain.

On January 26, the business said it was putting Shell Energy under “strategic review”, so staff and customers will be keen to know what is coming.

Shell said the review will probably take a few months, so it seems unlikely that there will be much to share just a week after it was announced.

Ms Streeter added: “There will be interest in whether the arrival of Wael Sawan as the new CEO, who was previously head of renewables, will see Shell start to make more inroads into cleaner, greener energy.

“Investors will also be keen to see the renewables arm of the business taking on more muscle, but it’s still a puny part of the revenues and profits have been non-existent in the last quarter.”