Energy giant Shell this morning announced adjusted earnings of £7.66billion for the first quarter of this year.
But the latest profits were slightly behind the profits recorded for Q4 of last year.
This reflects the continuing fall in oil and gas prices in recent months, which weakens even further the UK Government’s economic case for its draconian windfall tax on North Sea producers.
Brent futures were today down to just over $73 a barrel – a long way from recent highs of more than $120 last June. UK natural gas futures were just above 82p a therm – only a fraction of the 700p seen last August.
Shell CEO Wael Sawan said this morning: “In Q1, Shell delivered strong results and robust operational performance, against a backdrop of ongoing volatility, while continuing to provide vital supplies of secure energy.
“We will commence a $4billion (£3.18billion) share buyback programme for the next three months as part of our commitment to deliver attractive shareholder returns."
Improved operational performance
Shell stated there had been improved operational performance, lower underlying opex and better results in chemicals & products driven by trading & optimisation offsetting the impact of lower oil and gas prices, and higher tax compared with Q4 2022.”
The company also said it had strengthened the portfolio with developments including the restart of the Pierce field in the UK central North Sea. This followed a significant upgrade to allow gas to be produced after years of the field producing only oil.
Shell’s Q1 profits beat forecasts,and will no doubt lead to fresh calls for even-higher windfall taxes on UK North Sea oil and gas producers.
But market watchers point out that those pushing for higher taxes on UK-based international energy groups like Shell don’t seem to understand that their profits generated abroad aren’t subject to the windfall levy imposed by the British Government.
The new boss of Shell said just a few weeks ago that he would think twice about investing in the North Sea - and that America is now significantly more attractive than Britain for energy investment
CEO Wael Sawan said the UK Government should take a page from some of the things that the US have done recently, through the Inflation Reduction Act - a massive package of subsidies to spur green investment.
Windfall tax
The UK windfall tax, planning delays and uncertainty over subsidies were all making it harder for Shell to achieve its goal of investing up to £25billion in Britain this decade, he added.
By contrast. in America, the Inflation Reduction Act was providing “10-year clarity and tangible, fixed incentives that people know to bank on”.
Asked how Britain ranked in terms of attractiveness for energy investments, the CEO said the US was ahead significantly and that Europe was also ahead of Britain.
Mr Sawan said that he would think twice about investing in more oil in the UK as there were “more attractive locations right now”, such as the US Gulf of Mexico.
- Norwegian energy group Equinor said this morning that net operating income for Q1 had dropped to £9.95billion as against £14.62billion for the same period in 2022 - a fall of 32%.
Anders Opedal, president and CEO, said: “Equinor delivered strong earnings and cash flow across the business and remains a safe and reliable provider of energy to Europe.
“We continue to deliver competitive capital distribution to shareholders and invest in a profitable portfolio in oil and gas, renewables, and low-carbon solutions.
"We progressed on our strategy, optimising our oil and gas portfolio by acquiring Suncor Energy in the UK and continuing with focused exploration.
“We developed our portfolio within renewables and low-carbon solutions by acquiring the solar project developer BeGreen and collaborating with industry partners, aiming to build large-scale value chains for decarbonisation.”