Shell, Europe’s largest energy company, reported a bumper annual profit for 2022 on Thursday: $42.3 billion, more than double its 2021 total and probably a record for any Britain-based company.
The company, like other global energy giants, has been raking in cash because of high oil and natural gas prices, caused in part by the war in Ukraine. On Wednesday, Exxon Mobil reported $56 billion in annual profit, a record for the company.
The numbers, which beat expectations, showed that Shell is cashing in on its world-leading position in liquefied natural gas. Russia’s decision to cut off natural gas supplies to pipelines in Europe has triggered a boom in L.N.G., which is transported on ships from producers like the United States, Qatar and Australia. Most of Shell’s fourth-quarter profit came from the business unit that includes L.N.G.
For the fourth quarter alone, it had $9.8 billion in adjusted earnings, a 54 percent increase over the period a year earlier.
Shell said it would spend some of its cash on shareholders, by increasing its dividend for the quarter by 15 percent. It also said it would buy back another $4 billion in shares, about the same rate as a buyback program last year. Buyback programs tend to increase the value of shares.
The financial results were the first under a new chief executive, Wael Sawan, who succeeded Ben van Beurden, Shell’s chief for about nine years, at the beginning of January.
Despite the hefty profits, analysts say that Mr. Sawan is taking over Shell at a difficult time. The war in Ukraine has changed the operating environment for a company like Shell.
Oil and gas investments were considered something close to liabilities a year ago, amid efforts to diversity into renewable energy to address global warming. Now fossil fuels are not only more profitable but more valuable in terms of energy security, a concept neglected until recently.
At the same time, some investors are skeptical that renewable energy investments can provide the returns needed to finance dividends and stock buyback. Adding to such pressures, investors are now heavily favoring American companies like Exxon and Chevron, which have focused on oil and gas, over their European counterparts, which have been gradually paring back fossil fuels in favor of renewables.
“We believe Shell should pivot to a more balanced approach,” said Biraj Borkhataria, an analyst at RBC Capital Markets, an investment bank in a recent note to clients.
In a presentation on Thursday, Mr. Sawan appeared to respond to these concerns, signaling a more cautious approach to the shift from oil and gas to cleaner energy than pursued by his predecessor.
“The world needs a balanced energy transition,” he said. “Moving too fast by dismantling the current system before the new system is ready could worsen the situation.”
Mr. Sawan has already indicated he may dial back on Shell’s ambitions to be a major supplier of electricity by putting retail electricity units, including a British utility called Shell Energy that Shell acquired in 2017, up for review.
Still, the company remains under fire from politicians, who want oil companies to pay more tax, and environmentalists, who want more spending on clean energy to tackle climate change.
While pleasing to shareholders, Shell’s profits have prompted criticism. Britain twice increased tax rates on oil and gas production in 2022, but some British lawmakers are calling for further rises to help finance assistance for consumers paying high energy bills.
“Families struggle as oil companies rake it in,” Ed Davey, the leader of the Liberal Democrats, a British opposition party, said in a tweet on Thursday.
On a call with reporters Thursday, Mr. Sawan noted that about 20 percent of Britain’s natural gas flowed through Shell facilities last year, and suggested that rapid changes in the tax regime were “destabilizing” for an industry that invests over decades. He said the company’s plans to spend roughly $25 billion investing in the country would now be scrutinized because of concerns about “the underlying stability of the investment climate,” he said.
Environmentalists contend that Shell is not investing enough of its earnings in clean energy. While investment in the company’s unit that includes renewable energy increased by more than $1 billion in 2022, to $3.5 billion, it amounted to about 15 percent of overall investment of $25 billion.
“Shell can’t claim to be in transition as long as investments in fossil fuels dwarf investments in renewables,” said Mark van Baal, the head of Follow This, an environmental group, and a longtime critic of Shell.
Indeed, last year Shell returned far more money to shareholders in the form of dividends and buybacks — $26 billion — than it invested in the renewables unit. However, the company says that it makes low-carbon energy investments in several businesses, adding up to about one-third of overall spending.
