High oil prices, refinery margins and solid results in gas trading contributed to the increase in profit of major oil company Shell. But at the same time, the company faces criticism in Britain for the fact that while it has record profits, households are forced to pay record energy bills.
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The company doubled its adjusted net profit to a record $11.47 billion (CZK 276.1 billion) in the second quarter compared to the same period last year.
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Shell is one of the largest energy groups in the world, engaged in the extraction of oil and natural gas as well as the processing and distribution of these raw materials. It broke the quarterly profit record just three months after setting the previous record, with first-quarter adjusted net income of $9.13 billion, also a record at the time.
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Despite record revenues, the company will not increase its dividend, so it will once again pay 25 cents per share for the second quarter. Shell bought back $8.5 billion of its shares in the first half of the year and has now announced another buyback for the current quarter, this time for $6 billion. It thus returns money to shareholders in a different way than through the payment of dividends, on which it must apply withholding tax. Management confirmed that it plans to continue to return at least 30 percent of the cash it generates on an operating level to shareholders.
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Cheap but with a problem
At the same time, the company has already come under fire from critics once. It was after the beginning of the Russian occupation of Ukraine that the company took advantage of the then low prices and bought 100,000 tons of this raw material from Russia. According to The Wall Street Journal, Shell bought a barrel of oil for $28.50, currently the price is around $105.
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Shell claimed at the time that the reason was primarily to satisfy its customers. But the purchase took place at a time when a number of large companies had already announced that they would leave Russia, and therefore Shell was criticized not only by the people, but also by its larger customers. Therefore, the company immediately began to pour ashes on its own head.
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“We realize that our recent decision to buy Russian oil for the production of gasoline and diesel fuel for reasons of continuity of energy supply was wrong, and we regret it. We have committed to move the profits from this one-time purchase of Russian oil into a specially earmarked fund. After discussion with humanitarian organizations, we will use these funds to alleviate the catastrophic situation of the people of Ukraine,” said Ben van Beurden, CEO of Shell, for example, on the company’s website.
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“Behind our activities so far is the discussion about the need to end the purchase of energy raw materials from Russia and at the same time maintain energy supplies. Russia’s current threats to stop gas supplies to Europe show the difficulty of the situation we will have to face. I would like to express our clear position with the following measures.”
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They earn energy
Oil and gas companies have struggled since the start of the pandemic in 2020 as demand for travel plummeted, forcing many to curtail operations. However, with the abatement of the pandemic, demand returned, and the war in Ukraine then accentuated the price increase. A number of companies in the industry have seen their revenues soar, for which they are now facing criticism. Some governments are considering taxing these extra profits and using the collected money to help households with significantly higher energy costs.
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The $8.5 billion that Shell used to buy back shares in the first half of the year came largely from last year’s sale of surface mining activities in the United States. The American energy concern ConocoPhillips bought them from him for USD 9.5 billion.
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Other energy companies also have significantly higher profits. For example, Norway’s Equinor increased the extraordinary dividend it pays beyond the regular ones, and increased the amount of money earmarked for buying back its own shares. A buyout usually contributes to the growth of the company’s stock price on the stock exchange, because the number of shares in circulation will decrease and a higher profit will be made per share.
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Oil prices stayed above $100 a barrel in the second quarter, with North Sea Brent trading at an average of $114. At the beginning of the pandemic in the spring of 2020, prices fell to $20 per barrel, the closest contract for American light oil West Texas Intermediate (WTI) then even fell into negative values. This means that the seller of the contract still had to pay the buyer to buy the contract from him. Otherwise, he would have to physically take over the oil.
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