Shell Posts Record Profit on Soaring Oil and Gas Prices

(Bloomberg) -- Shell Plc posted its highest quarterly earnings on record, as the company was buoyed by high oil and gas prices despite taking a $3.9 billion accounting charge on its planned exit from Russia.

The last of the supermajors to report first-quarter results, Shell followed the overall pattern set by its peers. The London-based company surpassed even the highest analyst estimate as extreme volatility in the energy markets helped its trading division to boost earnings.

Shell shares rose 2.3% to 2,276.5 pence as of 8:01 a.m. in London.

The surging profits prompted renewed calls from activists and politicians for a windfall tax. U.K. Prime Minister Boris Johnson already appeared to rule out such a policy, saying it would discourage vital investment in domestic energy supplies.

The results “give us the confidence to plan future shareholder distributions and disciplined investments that will accelerate our strategy,” Chief Executive Officer Ben van Beurden said in a statement on Thursday. Distributions to investors in the second half could be more than 30% of cash flow from operations, the company said.

As the invasion of Ukraine disrupted a swathe of energy markets, from crude and natural gas to vegetable oils and nickel, buying and selling commodities has proved highly profitable. BP said its trading division had an “exceptional” performance in the first three months of the year. At Shell, margins from refining and trading jumped by $1.13 billion from the fourth quarter.

Shell's first-quarter adjusted net income was $9.13 billion, up from $3.23 billion a year earlier. That figure excludes the large writedown stemming from the company's planned exit from assets in Russia, including the liquefied natural gas project Sakhalin-2.

The majors -- with the exception of Chevron Corp. -- have written off a combined $37 billion as they sever ties with the Kremlin after its invasion of Ukraine. BP took the biggest hit on Tuesday, announcing that the dumping of its near 20% stake in Kremlin-backed Rosneft PJSC plus other assets in the country would cost it $25.5 billion.

Shell's return on average capital employed -- a measure of how effectively the company is putting its investors money to work -- rose above 10% for the first time in more than a decade. That may come as a relief for Van Beurden, who has long promised double-digit returns and last year came under attack by activist investor Dan Loeb, who wants to break up the company.

For the first time, Shell reported the earnings of its renewables and energy solutions division. The unit, which is relatively small today but will be key in convincing shareholders that the company can make a profitable transition to clean energy, posted adjusted net income of $344 million, compared with a loss of $102 million a year earlier.