Shell – Surging Oil Prices Bolster Profits, Shareholder Returns
A $3.9bn charge related to the withdrawal from Russia meant Shell PLC (LON:SHEL)’s net profits fell 38% from the fourth quarter to $7.1bn. However, excluding this and the impact of price fluctuations on contracts and investments, underlying cash profits (EBITDA) rose 16% to $19.0bn.
A $0.25 dividend was announced, reflecting a 4% increase from the fourth quarter. The group’s completed $4.0bn of the previously announced buyback programme. The second $4.5bn of repurchases is planned for the current period.
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Q1 2022 hedge fund letters, conferences and more
You Want Hedge Funds Who Have Skin In The Game
A number of studies have noted over the years that companies with the highest insider ownership, tend to outperform peers. The logic behind this conclusion is easy to understand. Managers who own a significant chunk of shares are unlikely to embark on value-destructive acquisitions or put to their company at risk as they stand to Read More
Shares rose 3.1% following the announcement.
Shell’s Record Profits
Laura Hoy, Equity Analyst at Hargreaves Lansdown:
“The Cinderella story we’ve seen among the oil majors continued this week as Shell posted record profits thanks to an extremely accommodative environment. The group’s exit from Russia took a $4bn bite out of the bottom line, but excluding this one-off expense, the group’s been firing on all cylinders as rising prices offset minor volume declines.
That’s given management the confidence to continue rewarding shareholders, with $5.4bn spent to line their pockets in the first quarter alone. That could tick even higher if oil continues its march upward – the group’s aiming to up its distributions to over 30% of operating cash flow.
Calls for a windfall tax have been rebuffed by claims that the majors will start to clean up their acts, spending some of the excess to build out their renewables divisions. This quarter was the first time we got a glimpse of how well this part of Shell’s business is functioning, and it was encouraging to see underlying profits were on the up.
While renewables is just a drop in Shell’s $19bn bucket, it’s likely to become a much larger slice of the pie as the energy transition ramps up. This technology is largely unproven, so oil and gas investors that have become accustomed to generous returns are taking a leap of faith. If the group’s able to build out this part of the business to become a reliable profit driver while oil prices are still high, it would make the transition all the smoother.”
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Updated on May 5, 2022, 11:09 am