Shell increases dividend by 15% as profits double

Shell’s profits hit $9.5bn in the third quarter as the oil and gas giant said it would increase its dividend by 15 per cent after a particularly strong performance from its oil business.

Europe’s largest oil and gas company said it would buy back a further $4bn of shares as it posted the second-highest quarterly profits in the company’s history in the three months to the end of September.

Shell’s adjusted earnings figure of $9.5bn beat the average analyst estimate of $9bn and was more than double the $4.13bn it recorded a year ago.

Although lower than the record $11.5bn it reported in the second quarter, the performance continues a record year for Shell, which has so far reported profits of more than $30bn in the first nine months.

That is already 50 per cent higher than the company’s total earnings for 2021 and is likely to increase calls on new UK prime minister Rishi Sunak to impose another round of tax rises on energy companies’ profits.

The company’s shares were up more than 3.5 per cent in morning trading on Thursday in London.

The UK-based group said it expected to increase its dividend for the fourth quarter by 15 per cent, with the payment to be made in March 2023, subject to board approval.

“We are delivering robust results at a time of ongoing volatility in global energy markets,” said chief executive Ben van Beurden.

Oil prices have dropped from more than $120 a barrel in June to about $90 a barrel as recession fears in Europe hit economic activity, while gas prices have softened from record levels earlier in the year.

The additional buybacks will increase total share purchases for the year to $18.5bn, bringing announced shareholder distributions for 2022 to about $26bn, the company said.

The company’s earnings were driven by particularly strong results from its upstream oil business.

Despite lower average crude prices compared with the second quarter, a “strong” operational performance in its deepwater assets resulted in the recovery of significant “high-value barrels”, Shell said.

That helped push earnings in the division to $5.9bn, up from $4.9bn in the three months to the end of June.

In contrast, earnings of $2.3bn in Shell’s integrated gas business, which includes liquefied natural gas trading, were down about 40 per cent from June due to lower production levels and lower seasonal demand, it said.

“Although integrated gas performance was particularly poor this quarter, Shell’s upstream division performed particularly strongly,” said Biraj Borkhataria, at RBC Capital Markets.

The 15 per cent increase in Shell’s fourth-quarter dividend was “well above” RBC’s own forecast and likely to be “well-received by investors”, he added.

Shell is the world’s largest trader of LNG, prices for which have soared globally since Russia’s full-scale invasion of Ukraine in February.

Benchmark prices for north Asia hit $70 per million British thermal units (mmbtu) in August, more than twice the price at the start of the year.

TTF, the European benchmark for pipeline gas and LNG, reached more than €300 per megawatt hour ($88.5/mmbtu) in August, up nearly 250 per cent compared with the start of the year.

Prices have since fallen in both Europe and Asia because of milder weather and Europe’s gas storage reaching nearly full capacity.

However, trading results for power and piped gas, which Shell reports under its renewables and energy solutions division, were “very strong”, it said, pushing earnings for that business up $700mn, from $400mn last quarter.