Q1 2022
- Multinational oil and gas company Shell (Formerly Royal Dutch Shell Plc), reported its highest quarterly profit since 2008 thanks to a jump in commodity prices. The results mirror exceptional profits seen across the energy majors, despite expensive write-downs as a result as an exiting of Russian operations.
- Adjusted earnings were up 184% y/y to $9.1 billion for the three months ended March, in line with expectations. This follows the $6.4 billion the company made for the fourth quarter of 2021. Shell also announced a 4% dividend hike to $0.25 per share.
- The oil giant bought back $4 billion of its own stock in the period, out of a potential $8.5 billion which was approved for stock repurchases. Shell has been accused of making supernormal profits whilst energy costs for the average consumer spiral. This has spurred calls by environmental and political campaigners for a “once-off” windfall tax on oil and gas companies. Whilst this presents downside risk to the counter, the chances of such a policy being passed are relatively slim as it would discourage investment and keep oil prices higher.
- Shell is not trading on an onerous valuation (historic PE of 11x and a dividend yield of 3.14%). As part of a series of global sanctions, the European Union plans to ban Russian oil imports within six months and refined products by the end of the year. This news sent oil prices higher and could keep prices buoyed for the medium term. Natural gas prices have risen 186% y/y, and Gasoline and Brent Crude are up 70% and 61%, respectively over the past year. Shell is a stock which I hold for clients in managed portfolios.