By Ron Bousso
LONDON (Reuters) – Shell again boosted its dividend and share repurchases on Thursday after fourth quarter profits hit their highest in eight years, fuelled by higher oil and gas prices and strong gas trading performance.
The strong results cap a dramatic recovery in 2021 for Shell and the oil and gas sector after energy demand and prices collapsed in 2020 in the wake of the COVID-19 pandemic.
Shell shares were up 0.7% by 1448 GMT, compared with a 0.5% decline for the broader European energy index.
Shell, which moved its headquarters from The Hague to London last month, said it expected to lift its dividend by 4% in the first quarter of 2022 to $0.25 per share, which would be the fourth rise since Shell cut its dividend in early 2020 for the first time since the 1940s.
The company also said it would buy back $8.5 billion worth of shares in the first half of 2022, including $5.5 billion from the sale of its Permian shale assets in the United States. That compares with share buybacks totalling $3.5 billion in 2021.
“2021 was a momentous year for Shell,” Chief Executive Ben van Beurden said in a statement.
Shell’s results came on the day British regulators hiked energy prices by 54% in response to higher power prices, prompting calls to levy a tax on oil and gas producers.
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, the largest trader of liquefied natural gas (LNG), said its integrated gas earnings were boosted by “significantly higher” profits from trading.
Trading helped offset an 11% fall in LNG sales and a 7% drop in LNG production in 2021 as a result of plant maintenance and unplanned outages, including at its flagship Prelude floating LNG plant in Australia.
Prelude would stay shut for the first three months of 2022, van Beurden told reporters, adding that Shell would help supply Europe with gas in case of Russian disruptions.
U.S. rival Exxon Mobil on Tuesday reported its largest profit in seven years, while Chevron’s profit missed estimates.
BP , TotalEnergies and Equinor report results next week.
Shell officially ditched “Royal Dutch” from its name this month and merged its dually-listed shares after moving its head office from The Hague to London as part of a tax and structure simplification drive, which van Beurden said would help the company plan to grow its low-carbon business.
Fourth-quarter 2021 adjusted earnings rose by 55% from the previous quarter to $6.4 billion, well above an average analyst forecast provided by the company for a $5.2 billion profit. It earned $393 million a year earlier.
For the year, Shell’s adjusted earnings rose to $19.3 billion, compared with $4.85 billion in 2020.
“Net income came in 22% ahead of consensus expectations and net debt fell sharply. On top, Shell announced an $8.5 billion share buyback programme for (the first half), also ahead of market expectations,” Morgan Stanley analyst Martijn Rats said.
The energy company said it planned this year’s spending at the lower end of the $23 billion-$27 billion after spending $20 billion in 2021.
Net debt dropped in the year to $52.55 billion from $75.4 billion at the end of 2020. Shell’s debt-to-capital ratio, or gearing, dropped to 23.1% from 32.2% over the same period.
Shell’s cash generation soared by a third to $45 billion in 2021 as global economic activity recovered from the pandemic.
GRAPHIC – Shell’s annual profits
GRAPHIC – Shell’s dividend
(Reporting by Ron Bousso; Editing by Tomasz Janowski and Edmund Blair)