Shell's Q4 earnings boosted by natural gas

Shell on Thursday joined the growing list of major energy companies turning in record-level profits, supported largely by its natural gas portfolio.

Shell said in its earnings report for the fourth quarter that it was able to turn in a strong performance "in a continuing uncertain economic environment."

That uncertainty ranged from the direction of the Chinese economy, to concerns of recession in the Western economies and the geopolitical risk emanating from the war in Ukraine.

The latter was the main driver in the higher-for-longer scenario for commodity prices last year. Brent crude oil, the global benchmark for the price of oil, topped $125 per barrel last year, but dropped off during the latter part of the year as the market adjusted to the loss of Russian supplies due to Western sanctions.

Brent is trading in the $85 per barrel range so far in February.

Shell reported adjusted net earnings for the fourth quarter of $9.8 billion, despite the late-year downturn in commodity prices. Most of the growth came from its natural gas sector, which accounted for roughly 60% of total revenue during the period.

Natural gas was in high demand for much of last year, particularly as the European economy looked to break the grip that Russia had over its energy sector. Former Soviet republics such as Poland had relied on Russia for almost all of their gas before the war began in February 2022.

The increasing importance of natural gas not only helped Shell post a 50% increase in fourth quarter revenue from year-ago levels, but showed that Shell has demonstrated its importance as a global energy supplier.

"Our results in Q4 and across the full year demonstrate the strength of Shell's differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world," CEO Wael Sawan said.

Beginning with liquefied natural gas projects in Algeria in the 1960s, Shell is now a global leader with its floating Prelude LNG facility offshore Australia among the largest facilities of its kind in the world.

Shell's quarterly performance was replicated across much of the energy sector, from energy services companies such as Halliburton, to rivals like Exxon and BP. Exxon came under fire last year for emphasizing shareholder return over new investments during a time of supply-side concerns.

Shell was no less favorable to its investors. It announced a 15% increase in its dividends and a $4 billion share buyback program along with its fourth quarter earnings.

But it does plan to invest. The company on Thursday outlined a capital spending plan for 2023 in the range of $23 billion to $27 billion.

Shell reported profits of around $9.5 billion during the third quarter, compared with $4.2 billion in profits during the same period in 2021.