Shell has posted first-quarter underlying earnings of $6.92billion (£5.09billion), beating analyst forecasts as soaring crude prices linked to the Iran conflict boosted the energy giant’s trading operations.
The Ftse 100 company reported profits nearly $1billion above market expectations of $6.36billion, marking a 24 per cent increase compared with the same period last year.
Higher crude prices triggered by the conflict in the Middle East proved the main driver behind the stronger-than-expected performance.
Shell’s chemicals and products division recorded underlying earnings of $1.93billion, rising sharply from $449million during the same quarter last year.
The company said higher crude costs significantly strengthened its oil trading business while volatile market conditions created profitable opportunities across its wider trading operations.
Brent crude reached $126 per barrel last week, marking its highest level in four years as fears over supply disruption intensified.
Campaigners condemned the results as households across Britain continue to face rising energy costs.
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “Shell’s outrageous results prove what every household knows: that the Middle East conflict is driving profits for energy firms while families across Britain dread the next bill landing on their doormat.”
Shell have faced criticism over their “outrageous” profits amid the Iran conflict
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Mr Francis added: “But while the profits of North Sea oil and gas giants soar and the cost of living keeps rising, these same companies are actively lobbying against windfall taxes and calling for tax cuts.”
Pressure groups called on the Government to take action against what they described as unjustifiable earnings.
Danny Gross, climate campaigner at Friends of the Earth, said: “The answer is clear strengthen the windfall tax on these indefensible profits and break our dependence on fossil fuels by powering our economy with homegrown renewables.”
Despite the rise in profits, Shell said the conflict in the Middle East had also caused significant disruption to its operations.
Fossil Free activists seen demonstrationing outside Shell
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The company’s Pearl GTL facility in Qatar stopped production in March after being struck during attacks, with repairs expected to take around 12 months.
Shell chief financial officer Sinead Gorman said: “We had a missile hit one of our assets. We’re affected as well.”
The company reported a 10 per cent reduction in global oil volumes because of disruption in Qatar, while overall oil and gas production fell four per cent compared with the previous quarter.
Shell warned second-quarter output would decline further because of the effective closure of the Strait of Hormuz shipping corridor alongside scheduled maintenance work.
Liquefied natural gas facilities partly owned by Shell in Qatar have also sustained damage during the conflict.
Investors reacted cautiously to the results, with Shell shares falling two per cent on Thursday.
The company reduced its quarterly share buyback programme from $3.5billion to $3billion, although it announced a five per cent increase in dividend payments.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: “Balance sheet strength and resilient shareholder distributions have been a key attraction for investors, so it’s understandable markets have reacted a little cautiously today.”
Net debt climbed 27 per cent over the past year to $52.6billion, while free cash flow dropped by $1.3billion from the previous quarter to $2.9billion.
Susannah Streeter, chief investment strategist at Wealth Club, said the slower pace of buybacks suggested management was monitoring developments in the Middle East rather than aggressively increasing shareholder returns.
Tessa Khan, founder and executive director of Uplift, said: “Yet again, Shell is profiting from conflict, while ordinary people face rising costs. These are unearned windfall profits handed to them by Trump’s war with Iran.”
Ms Khan accused Shell of lobbying the Government to scrap the windfall tax while households prepare for higher bills, describing the company’s position as “indefensible”.
Shell has defended its position following criticism
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Shell defended its position following criticism from campaigners.
Ms Gorman said: “We fully understand how energy prices affect people and businesses. Our people are working incredibly hard to meet people’s energy needs.”
The results follow BP’s announcement last week that first-quarter profits exceeded $3.2billion, more than doubling compared with the previous period.
Dan Coatsworth, head of markets at AJ Bell, said pressure for tougher windfall taxes is likely to increase after both oil majors reported sharply higher earnings linked to the conflict in the Middle East.