28th Jul 2022 14:47
(Alliance News) - Shell PLC's environment, social, governance credentials could be called into question by a growing contingent of environmentally conscious investors, as the oil major continues to return excess cash to shareholders.
Shell on Thursday said earnings surged by two-thirds in the first half of 2022, as the oil major continued to benefit from a sharp rise in oil prices following Russia's invasion of Ukraine.
For the six months to June 30, adjusted earnings before interest, tax, depreciation and amortisation was USD42.18 billion, up 67% from USD25.20 billion last year. Income attributable to shareholders almost tripled to USD25.15 billion from USD9.09 billion.
For the three months to June 30, Shell reported adjusted earnings of USD11.5 billion, smashing the record USD9.1 billion generated in the first quarter.
Revenue grew 59% to USD184.26 billion from USD116.18 billion a year ago.
Shell is profiting from the rising crude oil price. The cost of Brent oil has risen by 45% over the past 12 months, peaking at around USD133 a barrel in March. Shell shares have risen in lockstep with oil prices, up by more than 50% in the same period.
On Thursday afternoon, the North Sea benchmark stood at USD108.35.
Shell declared an interim dividend of USD0.50, up 21% from USD0.41 last year.
In addition, the oil company launched a share buyback programme of USD6 billion, which is expected to be completed before the release of its third quarter results, which will be out on October 27. The aim of the buyback is to reduce issued share capital, the company explained. It wants to buy back up to USD3.6 billion in London-contracted shares and USD2.4 billion shares under Netherlands contracts.
"With the current energy sector outlook and subject to board approval, shareholder distributions are expected to remain in excess of 30% of cash flow from operating activities," Shell said.
Shell's free cash flow jumped to USD22.99 billion in the first half from USD17.37 billion the year before.
"The good times are unlikely to last forever, oil prices tend to wax and wane with the economy, so we could see a cooling in the years ahead. So we're pleased to see Shell funnelling some of that excess cash into its Renewables business in a bid to keep up with the energy transition. However the bulk of Shell's spending power went to legacy oil and gas which underscores the group's long-term strategy when it comes to the energy transition," Hargreaves Lansdown analyst Laura Hoy said.
Shell has faced criticism in some quarters, as it lags behind UK rival BP PLC, which has trumpeted its transition into cleaner energy by setting itself a target to become a net-zero company by 2050.
"Shell's taken a different approach then peers, focusing more on managing lower-impact power solutions for customers rather than ramping up renewable power generation capacity. This includes things like expanding into lower-carbon fuels investing at pace with demand rather. Renewable power generation will be a part of the strategy, but it's not the lynchpin," Hoy commented.
"This may not appease the growing number of investors who are becoming more focused on environmental metrics, which would put the group's ESG credentials below peers who are going all-in. But from a financial standpoint it looks like a wise strategy as returns from renewables are yet unproven and demand for the black stuff is likely to remain elevated in the medium term," the Hargreaves Lansdown analyst added.
Shell shares were up 1.3% at 2,145.00 pence in London on Thursday afternoon.
By Arvind Bhunjun; [email protected]
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