Shell Predicts Increase in Natural-Gas Profits During Fourth Quarter

Shell PLC is a British-Dutch oil and gas company with headquarters in The Hague, Netherlands. It is the second-largest company in the world in terms of revenue, and it is active in more than 70 countries.

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ExxonMobil expects its quarterly natural-gas profit to be significantly higher than in the preceding three months, when price swings hurt results in that core business amid a global scramble for energy. The oil giant said Friday that it experienced higher refining margins in its chemicals and fuels business in the last three months of 2022, but that trading profit from refined products will lag third-quarter results.

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The upcoming fourth-quarter earnings report is scheduled for Feb. 2, and it looks like Shell is still on track to achieve record profits for the year. The expected increase in natural gas profits is due in part to lower taxes in that business sector, which is typically Shell's biggest moneymaker. The decreased tax burden has offset lower sales volumes in liquefied natural gas, which have been impacted by production issues like plant outages.

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Shell said Friday that it expects to pay around $2 billion more in European Union and U.K. energy-profit levies, also known as windfall taxes. These taxes have been adopted by governments in order to help businesses and consumers cope with soaring energy costs. Shell said that these additional taxes won’t impact its fourth-quarter adjusted earnings or cash position, because of the expected timing of payments over the coming years.

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In addition to the $360 million in anticipated windfall taxes Shell earlier disclosed for 2022, the company is now facing an additional $2 billion in levies. Shell didn't break down the amounts by region, but 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.

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Friday's earnings snapshot for Shell and its peers comes after a string of quarters with 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 who are feeling the pinch of high energy prices amid Russia's war in Ukraine.

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"Although the combination of better trading and lower taxes should support earnings, 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.

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On Sunday, Shell veteran Wael Sawan 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.
Shell said Friday that it expects to see a loss or profit of up to $100 million from its renewable energy business in the fourth quarter. This represents a small portion of the company's overall portfolio.