Earnings surge at Shell amid soaring energy prices

(Sharecast News) - Oil major Shell posted an above-forecast surge in profits on Thursday, fuelled by soaring energy prices in the wake of the US-Iran war.

First-quarter adjusted earnings came in at $6.92bn, up from $3.26bn in the fourth quarter and $5.58bn a year previously. Consensus had been for earnings closer to $6.36bn.

The spike in earnings came despite a 4% fall in total oil and gas production quarter-on-quarter, primarily due to damage to Shell's facilities in Qatar.

Shell said repairs at the vast Pearl gas-to-liquids plant, which was struck by Iranian missiles last month, would take about a year and cost around $500m. Second-quarter integrated gas production was slated to fall by at least 30% in the second quarter as a result of the damage.

Around 20% of the company's oil and gas production comes from the Middle East.

Wael Sawan, chief executive, said: "Shell delivered strong results enabled by our relentless focus on operational performance in a quarter marked by unprecedented disruption in global energy markets."

Last month Shell announced it was buying Canadian shale producer ARC Resources in a $16.4bn deal. Sawan said the acquisition accelerated the company's strategy by adding "complementary, high-quality, low-cost liquids and gas assets that we believe will deliver value for decades to come."

The blue chip upped the divided by 5%. However, it trimmed its quarterly buyback programme to $3bn from $3.5bn.

Derren Nathan, head of equity research at Hargreaves Lansdown, said that while the proposed acquisition of ARC Resources would help diversify supply, higher net debt was weighing on the pace of share buybacks.

As at 0930 BST, the blue chip was trading 2% lower at 3,149.33p.

Dan Coatsworth, head of markets at AJ Bell, said: "The oil price has been volatile since the conflict began on stop-start hopes of a resolution, and that volatility created opportunities for Shell's trading arm.

"Calls for a windfall tax on profits will only get louder now that both BP and Shell have reported bumper earnings as a direct result of the Middle East war."

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