One of the world’s largest oil companies just booked the largest annual profit in its history – and now it’s planning to spend $4 billion to buy back a lot of its shares.
On Thursday, February 2nd, Shell announced that it has earned its biggest annual profit, a feat made possible by the way its natural gas business grew thanks to escalating fuel prices. The company’s stock price increased by over 2.7% following the release of its Q4 and annual earnings report.
The company likewise said it has allocated $4 billion for repurchasing stock. Executives say they expect to be done with the buy-back initiative by May 4th, the date set for Shell’s Q1-2023 earnings update.
A Banner Year for Shell
The company recorded a profit of $39.9 billion as of end-2022, twice over the $19.3 billion it posted at the end of 2021 and going slightly over the $38.3 billion forecast by analysts. The total is also considerably larger than Shell’s adjusted earnings of $28.4 billion back in 2008, which was, at the time, its biggest annual profit.
Shell also bucked the $7.97 billion in adjusted earnings in Q4 projected by analysts by logging adjusted earnings of around $9.8 billion.
Indeed, as Shell CEO Wael Sawan put it, it was a huge year for the company and an equally sizable one to look back upon.
But any further growth will be dependent on OPEC+, as the consortium is adamant about keeping a tight rein on the global oil supply for this year. Nevertheless, analysts say that Shell remains in a good place as the year progresses and oil prices are not likely to hit the >%50+ level again anytime soon.
For now, however, Shell’s stock price in the London market rose by barely 1%, while the company’s US-listed shares moved somewhat slower during Thursday trading in New York.
Driven by Natural Gas
Shell’s natural gas business was what cinched its record profits for 2022.
The price of natural gas soared in Europe following the Russian invasion of Ukraine in early 2022. Since then, it hit several record highs by the third quarter of the year before dropping to prewar levels as the new year began.
Likewise, the rising cost of power generation worldwide also drove gains for Shell as well as other oil and gas businesses.