Shell Expects Natural-Gas Profit Rebounded in Fourth Quarter

The trading update ahead of fourth-quarter earnings, scheduled for Feb. 2, suggests Shell remains on track for what analysts expect to be a record full-year profit. The higher expected natural-gas profit is driven in part by lower taxes in the business, typically Shell’s biggest cash generator. That decreased tax burden helped offset lower sales volumes in liquefied natural gas, which Shell said were hurt by production issues including plant outages.

Shell said Friday it expects to pay around $2 billion more in European Union and U.K. energy-profit levies—so-called windfall taxes—that governments have adopted to help businesses and consumers cope with soaring energy costs. It said those additional taxes won’t impact its fourth-quarter adjusted earnings or cash position because of expected timing of payments over coming years.

The $2 billion is in addition to $360 million in anticipated windfall taxes Shell earlier disclosed in 2022. Shell didn’t break down the levy amounts by region. For years, the company has received tax relief from North Sea investments and the costs of decommissioning U.K. production activities, offsetting any U.K. tax liabilities it otherwise might have had.

Friday’s earnings snapshot comes after Shell and its peers have posted consecutive quarters of record profits driven by soaring prices and strong global demand for energy. The bumper earnings have fueled tens of billions of dollars in share buybacks and dividends from global energy giants, spurring scrutiny from governments, trade groups and consumers bitten by high energy prices amid Russia’s war in Ukraine.

“The combination of better trading and lower tax should support earnings, however it is disappointing to see Shell’s liquefaction volumes come in lower once again,” RBC Capital Markets analyst Biraj Borkhataria said, describing Shell’s overall earnings preview as mixed.

On Sunday, Shell veteran Wael Sawan, most recently its head of integrated gas and renewables, took over as chief executive, succeeding longtime boss

Ben van Beurden.

The leadership change comes as Shell grapples with balancing its traditional oil-and-gas business with promises to move further into renewable energy to help cut greenhouse-gas emissions.

Renewable energy remains a small portion of Shell’s overall portfolio. The company said Friday it expects adjusted earnings from renewable energy in the fourth quarter of between a $500 million loss and $100 million profit.

Write to Jenny Strasburg at [email protected]

The trading update ahead of fourth-quarter earnings, scheduled for Feb. 2, suggests Shell remains on track for what analysts expect to be a record full-year profit. The higher expected natural-gas profit is driven in part by lower taxes in the business, typically Shell’s biggest cash generator. That decreased tax burden helped offset lower sales volumes in liquefied natural gas, which Shell said were hurt by production issues including plant outages.

Shell said Friday it expects to pay around $2 billion more in European Union and U.K. energy-profit levies—so-called windfall taxes—that governments have adopted to help businesses and consumers cope with soaring energy costs. It said those additional taxes won’t impact its fourth-quarter adjusted earnings or cash position because of expected timing of payments over coming years.

The $2 billion is in addition to $360 million in anticipated windfall taxes Shell earlier disclosed in 2022. Shell didn’t break down the levy amounts by region. For years, the company has received tax relief from North Sea investments and the costs of decommissioning U.K. production activities, offsetting any U.K. tax liabilities it otherwise might have had.

Friday’s earnings snapshot comes after Shell and its peers have posted consecutive quarters of record profits driven by soaring prices and strong global demand for energy. The bumper earnings have fueled tens of billions of dollars in share buybacks and dividends from global energy giants, spurring scrutiny from governments, trade groups and consumers bitten by high energy prices amid Russia’s war in Ukraine.

“The combination of better trading and lower tax should support earnings, however it is disappointing to see Shell’s liquefaction volumes come in lower once again,” RBC Capital Markets analyst Biraj Borkhataria said, describing Shell’s overall earnings preview as mixed.

On Sunday, Shell veteran Wael Sawan, most recently its head of integrated gas and renewables, took over as chief executive, succeeding longtime boss

Ben van Beurden.

The leadership change comes as Shell grapples with balancing its traditional oil-and-gas business with promises to move further into renewable energy to help cut greenhouse-gas emissions.

Renewable energy remains a small portion of Shell’s overall portfolio. The company said Friday it expects adjusted earnings from renewable energy in the fourth quarter of between a $500 million loss and $100 million profit.

Write to Jenny Strasburg at [email protected]