Shell profits hit record $11.5bn as UK households face winter energy bill pain – Business Live

Introduction: Shell reports record profits of $11.5 billion

Good morning and welcome to our continuing coverage of business, the global economy and financial markets.

Oil giant Shell has doubled its profits in the last quarter, thanks to rising energy prices since the start of the war in Ukraine that is hitting homes and businesses.

Shell has reported a record adjusted profit of $11.47bn (£9.4bn) in the latest quarter, up from $5.5bn in April-June 2021, as it benefited from prices realized higher, higher refining margins and stronger gas and power trading.

That breaks Shell’s record quarterly profit of $9.1 billion accumulated between January and March, and topped analysts’ forecasts.

Shell says it had a “strong performance in a turbulent economic environment”.

Shell CEO Ben van Beurden says:

“With volatile energy markets and the continued need for action to tackle climate change, 2022 continues to present major challenges for consumers, governments and businesses alike.

Consequently, we are using our financial strength to invest in the secure energy supply the world needs today, taking real and bold action to reduce carbon emissions and transforming our company for a low-carbon energy future.

But the company will also throw more money at investors, announcing a $6 billion share buyback program in the third quarter.

Shell’s profits hit a new record high of $11.5 billion in the second quarter, more than double the same period a year earlier. It is using the cash to launch a $6 billion share buyback

— Emily Gosden (@emilygosden) July 28, 2022

And with gas prices at their highest level since the Ukraine war began, the UK energy price cap could reach £3,850 a year in January.

The benchmark wholesale natural gas prices for Britain and the Netherlands, ICIS NBP and ICIS TTF, have risen as Russia’s Gazprom has cut flows through Nord Stream to 20% of your ability Dutch price up more than 10 times average in 2019. @ICISOfficial #NBP #TTF #natgas pic.twitter.com/aWbUEo97zk

— Tom Marzec-Manser (@tmarzecmanser) July 27, 2022

BFY Group, a utilities consultancy, is warning that the most vulnerable households with pre-paid meters could see energy bills of £500 in January alone.

Consumers were also warned that annual charges of more than £3,500 a year, or £300 a month, could become the norm “by 2024”.

This is very, very bad. You still don’t think people misunderstand each other.

Average energy bills of £300 a month until ‘in’ 2024 are a disaster.https://t.co/lCbKfp7Lav

— Rob Davies (@ByRobDavies) July 27, 2022

The grim forecasts came a day after MPs said millions of people would fall into “unmanageable debt” without more government help to pay their bills, following a rise in wholesale gas prices to levels almost a record.

He will come today too

Today we find out if the world’s largest economy is contracting. when second quarter US GDP is released.

Some analysts are predicting that US economic activity fell for the second consecutive quarter, which would amount to a technical recession.

European stock markets are expected to rise, despite the US central bank announcing another sharp rise in interest rates last night.

The Federal Reserve made its second straight hike of 0.75 percentage points as it goes through its most aggressive monetary tightening cycle since 1981, but also suggested it could slow the pace of hikes if inflation eases .

the agenda

  • 9.30am BST: Weekly UK business and economic activity data
  • 10:00 BST: Eurozone economic, business and consumer confidence report
  • 13:00 BST: German inflation rate for July
  • 1.30pm BST: US Q2 GDP report
  • 1.30pm BST: Weekly US Jobless

Updated at 07.29 BST

Key events

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Key events (3)Shell (6)BFY Group (2)UK (2)USA (2)Ben van Beurden (1)

Centrica profits rise in ‘toughest energy crisis in living memory’

Profits have also soared at parent company British Gas, thanks to higher income from its oil, gas and nuclear assets, and rising commodity prices.

Centrica has reported adjusted operating profit of $1.34bn in the first half of this year, up from £262m in the January-June 2021 period.

The increase in adjusted operating profit was primarily driven by the Upstream businesses, reflecting strong production and generation volumes and the impact of higher commodity prices.

In addition, Energy Marketing & Trading handled the more volatile commodity price environment well and delivered a higher adjusted operating profit

Centrica has reinstated its dividend, which it suspended after the Covid-19 pandemic began in 2020.

Chief executive Chris O’Shea says we are facing the most difficult energy crisis in living memory:

We have made significant progress de-risking the Group and building a stronger business for the benefit of all stakeholders.

This strength has allowed us to lead the industry in measures to protect and support customers through the most difficult energy crisis in living memory and the benefit of our balanced portfolio can be seen in our first half performance. We expect this to continue in the second half, supporting continued investment in customer service and elsewhere in our portfolio.

Centrica was also boosted by asset sales, having sold Spirit Energy’s Norway and Statfjord UK oil and gas assets this year (but had a statutory loss of £1bn due to accounting remittances).

Centrica insists it is “very conscious” of the impact of rising bills and wider inflationary pressures on customers, and is investing more than £100m in customer service, support and pricing during 2022 .

British Gas Energy is also recruiting 500 more customer service staff to handle higher call volumes from customers struggling to pay their bills.

Centrica boss Chris O’Shea is defending a rise in half-year profits to £1.34bn and restarting dividends as his clients face a terrible winter. He says the profit jump is not driven by consumer business and must balance all stakeholders, including individual pensioners who rely on dividends

— Ashley Armstrong (@AArmstrong_says) July 28, 2022

Updated at 08.41 BST

Here’s some early analysis of Shell’s results from Brewin Dolphin Investment Manager Stuart Lamont:

“The strong oil price backdrop has helped Shell deliver a very successful set of results. The dividend may have remained the same, but the share buyback program is positive news for shareholders.

Many investors questioned the well-known “never sell Shell” mantra during the worst of the pandemic and the company’s subsequent dividend cut, but with a path to zero and attractive net returns, Shell is in a strong position, although political risk remains high as high energy costs hit households.”

Shares in Shell rose nearly 1% in early trade to a three-week high after beating profit forecasts.

So far this year, Shell shares are up more than 30%.

Shell’s share price this year Photo: Refinitiv

Shell’s refining profit margins triple

Shell’s refining margins nearly tripled in the last quarter, to $28 per barrel of oil.

That’s up from a refining margin of $10 a barrel in the first three months of this year.

Shell says these higher refining margins reflect “the dislocation of product markets, particularly middle distillates.”

Middle distillates are refined from crude oil and include heating oil, diesel and jet fuel.

Fuel retailers have blamed the spirit of refining companies for record prices on the esplanades this year. And earlier this month, the UK’s competition watchdog raised concerns about refinery margins.

Here are the results for Shell from Reuters:

Refining margins tripled in the quarter to $28 a barrel.

They have weakened substantially in recent weeks amid signs of reduced demand for gasoline in the United States and Asia.

Shell said its refinery utilization would increase to 90-98% in the third quarter, compared with 84% in the second quarter.

Shell’s integrated gas division posted adjusted earnings of $3.75 billion in the latest quarter, more than double the $1.6 billion in the second quarter of 2021.

That’s down slightly from the January-March quarter, when the division – which includes liquefied natural gas (LNG) – earned $4 billion.

Shell says this year’s gas gains were driven by “higher realized prices and higher trading and optimization results”.

Shell says it distributed a total of $7.4 billion to its shareholders in the last quarter.

It will pay a dividend of $0.25 per share for the second quarter, which I think will be worth about $1.8 million to its investors.

But it has also conducted an $8.5 billion share buyback program through 2022 (boosting its stock price) and will conduct a new $6 billion program this quarter.

Given the current outlook for the energy sector, Shell says, distributions to shareholders are expected to remain “above 30% of cash flow from operating activities”.

Introduction: Shell reports record profits of $11.5 billion

Good morning and welcome to our continuing coverage of business, the global economy and financial markets.

Oil giant Shell has doubled its profits in the last quarter, thanks to rising energy prices since the start of the war in Ukraine that is hitting homes and businesses.

Shell has reported a record adjusted profit of $11.47bn (£9.4bn) in the latest quarter, up from $5.5bn in April-June 2021, as it benefited from prices realized higher, higher refining margins and stronger gas and power trading.

That breaks Shell’s record quarterly profit of $9.1 billion accumulated between January and March, and topped analysts’ forecasts.

Shell says it had a “strong performance in a turbulent economic environment”.

Shell CEO Ben van Beurden says:

“With volatile energy markets and the continued need for action to tackle climate change, 2022 continues to present major challenges for consumers, governments and businesses alike.

Consequently, we are using our financial strength to invest in the secure energy supply the world needs today, taking real and bold action to reduce carbon emissions and transforming our company…

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