Shell chief executive Ben van Beurden signalled the oil and gas group was ready to pay higher taxes as its announcement of $9.5bn in third-quarter profits prompted renewed calls for additional levies on energy companies.
The profits are only surpassed in the company’s history by the previous quarter’s $11.5bn, leaving Europe’s largest energy major on course to smash its annual profit record of $31bn set in 2008. Shell has already reported earnings of more than $30bn in the first nine months of the year.
Van Beurden said it was a “societal reality” that governments would be looking to companies such as Shell, which have benefited from soaring oil and gas prices, to help offset energy costs for struggling consumers.
“We should be prepared and accept that also our industry will be looked at for raising taxes in order to fund the transfers to those who need it most in these very difficult times,” he added. “We have to embrace it.”
The UK government in May introduced an additional 25 per cent energy profits levy on oil and gas producers in the North Sea to help raise funds but Shell was not required to make any tax payments under the scheme in the third quarter.
Investments in new fields and costs associated with decommissioning other projects cancelled out all North Sea profits.
Shell does not expect to pay any taxes under the energy profits levy until early next year.
Ed Miliband, the shadow secretary of state for climate change and net zero, said Shell’s global profits of $9.5bn were “further proof that we need to make the energy companies pay their fair share”.
Shell’s performance beat the average analyst estimate of $9bn and was more than double the $4.1bn it recorded a year ago.
The UK-listed group said it expected to increase its dividend for the fourth quarter by 15 per cent, with the payment to be made in March 2023, subject to board approval. Shell will also buy back a further $4bn of shares in the fourth quarter, bringing total share purchases for the year to $18.5bn.
The company’s shares rose 5 per cent.
Oil prices have dropped from more than $120 a barrel in June to about $90 a barrel as recession fears in Europe hit economic activity, while gas prices have softened from record levels earlier in the year.
But despite lower average crude prices, Shell benefited from a strong operational performance from its deepwater oil assets, particularly in the US Gulf of Mexico, resulting in the recovery of significant “high-value barrels”, it said.
“Best production we’ve seen in a decade,” said chief financial officer Sinead Gorman after the publication of the results. “Gulf of Mexico is doing fabulously.”
That helped push profits in the division to $5.9bn, up from $4.9bn in the three months to the end of June.
In contrast, earnings of $2.3bn in Shell’s integrated gas business, which includes liquefied natural gas trading, were down about 40 per cent from June due to lower production levels and lower seasonal demand, it said.
“Although integrated gas performance was particularly poor this quarter, Shell’s upstream division performed particularly strongly,” said Biraj Borkhataria at RBC Capital Markets.
The 15 per cent increase in Shell’s fourth-quarter dividend was “well above” RBC’s own forecast and likely to be “well-received by investors”, he added.
Gorman said Shell’s integrated gas results were often weaker in the third quarter than other quarters, adding that revenues had been pushed down further by the decision to divest its stake in the Sakhalin-2 liquefied natural gas project in eastern Russia.
Trading results for power and piped gas, however, which Shell reports under its renewables and energy solutions division, were “very strong”, it said, pushing earnings for that business up $700mn, from $400mn last quarter.