Oil giant reports record annual profits

British oil giant Shell on Thursday posted its highest-ever annual profit, bolstered by soaring fossil fuel prices and robust demand since Russia’s full-scale invasion of Ukraine last year.

Shell reported adjusted earnings of $39.9 billion for the full-year 2022. This comfortably surpasses the $28.4 billion in 2008 which Shell said was the firm’s previous annual record and is more than double the firm’s full-year 2021 profit of $19.29 billion.

Analysts polled by Refinitiv had expected full-year 2022 net profit to come in at $38.3 billion.

For the final quarter of 2022, Shell reported adjusted earnings of $9.8 billion.

Shell announced a $4 billion share buyback program, which is expected to be completed by its first-quarter 2023 results — due out by early May — and a 15% dividend per share increase for the fourth quarter.

“It is a huge year for Shell and a huge year to look back on as well,” Shell CEO Wael Sawan told CNBC’s Steve Sedgwick in his first earnings interview since taking on the role on Jan. 1.

“I feel privileged to be stepping into this role at such a great point in the company’s history. As we look ahead, I think we have a unique opportunity to be able to succeed as the winner in the energy transition. We have a portfolio that I think is second to none,” Sawan said.

“My focus will be very much around performance and capital discipline,” he added.

The results follow in the footsteps of historic annual earnings for U.S. oil majors Exxon Mobil and Chevron, with the West’s largest oil and gas companies expected to rake in combined profits of nearly $200 billion for the year, according to Refinitiv data.

The extraordinary scale of the industry’s earnings has renewed criticism and sparked calls for a Big Oil windfall profit tax.

Shell said last month that it expected to take a $2 billion hit for the final three months of 2022 as a result of new taxes in the European Union and the U.K.

“Ultimately, taxes are a matter for governments to decide on. We, of course, engage and provide perspectives and the key perspective that we try to provide is a context around the fact that companies like ourselves that need to invest multiple billion dollars to support the energy transition require a secure and stable investment climate,” Sawan said.

“For example, windfall taxes or price caps simply erode confidence in that investment stability and so I do worry about some of the moves being made,” he continued.

“I think there is a different approach that needs to be had which is to really draw investment capital at a time when we need to be able to embed energy security into the broader energy system here in Europe.”

Shares of the London-listed company rose 0.6% during early morning deals on Thursday.

Shell said its cash capital expenditure outlook for 2023 sits between $23 billion to $27 billion. Of that, Sawan said roughly one-third if not slightly more would go into areas like renewables.

Shell, which is aiming to become a net-zero emissions business by 2050, said that adjusted earnings for its Renewable and Energy Solutions unit came in at $293 million for the final three months of 2022, down from $383 million in the third quarter.

“Shell can’t claim to be in transition as long as investments in fossil fuels dwarf investments in renewables,” said Mark van Baal, founder of Dutch group Follow This.

“The bulk of Shell’s investments remain tied to fossil fuel businesses, because the company doesn’t have a target to slash its total CO2 emissions this decade, as is required to reach Paris.”

In recent quarters, Big Oil executives have defended their rising profits and said the significant disruption to global energy markets due to the war in Ukraine has reaffirmed the importance of helping to solve “the energy trilemma.”

According to a statement to investors from BP CEO Bernard Looney late last year, this refers to “secure, affordable and lower carbon energy.”

Climate campaigners and activist shareholders have been sharply critical.

“That Shell’s annual profits more than doubled last year, while millions of people have been facing the impossible choice between putting food on the table and heating their homes, is simply staggering,” said Sana Yusuf, climate campaigner at Friends of the Earth.

“People can see the injustice of paying eye-watering energy costs while big oil and gas firms rake in billions,” Yusuf said.

U.S. oil giant Exxon Mobil on Tuesday reported a $56 billion profit for 2022, marking a historic high for the Western oil industry, while Chevron on Friday posted a record $36.5 billion profit for last year.