Friday, January 07, 2022

Shell benefits from energy crisis as soaring gas prices lift profits
Company says investors will benefit from continuation ‘at pace’ of $7bn share buyback scheme

Shell expects trading results at its integrated gas business in the fourth quarter to be ‘significantly higher’ year on year. 
Photograph: Kirsty Wigglesworth/AP

Mark Sweney

Guardian Business
Fri 7 Jan 2022 

Shell expects a significant boost in profits in its natural gas division, thanks to soaring prices, when it reports its latest results next month, as the oil and gas company said investors would benefit from the continuation “at pace” of its $7bn share buyback scheme this year.

Shell, the world’s largest producer and trader of liquified natural gas, expects trading results at its integrated gas business in the fourth quarter to be “significantly higher” year on year as the rocketing price of gas outweighs a drop in production volume because of unplanned maintenance works.

Wholesale gas prices continue to break records, with energy suppliers warning of a “national crisis” that has already led to 27 suppliers going bust, and the prospect of bills increasing by more than 50% in April to about £2,000 a year.

Shell, which will report its fourth-quarter results on 3 February, said it intends to pick up the pace of its $7bn (£5.1bn) share buyback scheme, which is being funded using the proceeds of the $9.5bn sale of its US Permian Basin shale oil assets to ConocoPhillips at the start of December.

The company has already returned $1.5bn to investors and said on Friday the remaining $5.5bn “will be distributed in the form of share buybacks at pace”. The remaining $2.5bn from the sale is being used to strengthen Shell’s balance sheet.


While Shell is benefiting from the energy crisis, last week the business secretary, Kwasi Kwarteng, held emergency meetings with the bosses of the UK’s biggest energy suppliers, who are pushing for the government to intervene to alleviate the impact of soaring prices.

Potential interventions being lobbied for include a windfall tax on major oil and gas companies such as Shell, as well as extending fuel grants, moving green levies from household bills into general taxation, and axing the 5% VAT on bills imposed when the UK was part of the EU.

Later this month, Shell will move its headquarters from the Netherlands to the UK and scrap its dual share structure, after shareholders voted to back a proposal to simplify the Anglo-Dutch company’s operation.

Shell pursues $7 billion buyback 'at pace' despite LNG troubles

LONDON (Reuters) -Royal Dutch Shell said it will pursue "at pace" a $7 billion share buyback largely funded from the sale of its U.S. shale business as it faces liquefied natural gas (LNG) outages and slower fuel sales due to the economic hit from Omicron.

Shares in Shell, the world's largest trader of LNG, were down 0.32% on Friday after a trading update ahead of its quarterly results on Feb. 3. This compared with a 0.12% rise in the broader European energy index.

Shell said that its production and liquefaction volumes were impacted in the fourth quarter by unplanned maintenance, mainly in Australia, where its giant Prelude floating LNG https://www.reuters.com/business/energy/shell-halts-prelude-lng-production-loading-after-power-outage-2021-12-03 vessel was hit by a power outage.

LNG liquefaction volumes are expected to be between 7.7 and 8.3 million tonnes, well below a peak of 9.2 million tonnes in the fourth quarter of 2019, Shell said.

Shell's LNG trading results in the fourth quarter of 2021 are, however, set to be "significantly higher" compared to the third quarter.

Natural gas and electricity prices around the world have soared since the middle of last year on tight gas supplies and higher demand as economies rebounded from the COVID-19 pandemic.

Benchmark European gas prices and Asian LNG prices hit all-time highs in the fourth quarter.

Shell will later this month move its head office from The Hague to London, scrap its dual share structure and change its name to Shell Plc as part of a plan to simplify its structure and shift its tax residence from the Netherlands.

Last year Shell sold its Permian Basin shale oil assets to ConocoPhillips for $9.5 billion in cash, an exit from the largest U.S. oilfield as it shifted its focus to a clean energy transition. It said it would return $7 billion of the proceeds to shareholders on top of 20% to 30% of cashflow from operations.

"The remaining $5.5 billion of proceeds from the Permian divestment will be distributed in the form of share buybacks at pace," it said.

Shell, which operates more than 45,000 petrol stations, said that earnings from its marketing division were set to be lower than the third quarter "the demand impact due to the Omicron virus and foreign exchange impacts in Turkey."

(Reporting by Ron Bousso; Editing by Jason Neely and Alexander Smith)


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