Shell’s adjusted earnings figure of $9.45 billion (£8.1 billion) was more than double a year earlier but down 18% on the previous quarter.

Income attributable to Shell plc shareholders, compared with the second quarter 2022, mainly reflected lower LNG trading and optimisation results, lower chemicals and refining margins, as well as higher underlying operating expenses, partly offset by increased volumes from higher-value barrels in Deep Water.

Third quarter 2022 income attributable to Shell plc shareholders also included net losses of $1.0 billion due to the fair value accounting of commodity derivatives, and impairment charges of $0.4 billion. These net losses are included in identified items amounting to a charge of $1.4 billion in the quarter. This compares with identified items in the second quarter 2022 which amounted to a net gain of $5.2 billion.

Adjusted Earnings and Adjusted EBITDA were driven by the same factors as income attributable to Shell plc shareholders and adjusted for the above identified items and the cost of supplies adjustment of $1.4 billion.

Cash flow from operating activities for the third quarter 2022 was $12.5 billion, and included working capital outflows of $4.2 billion, and tax payments of $3.4 billion. The working capital outflows are mainly driven by the increase in European gas inventories, and initial margin outflows, partly offset by lower prices on crude inventories.

Cash flow from investing activities for the quarter was an outflow of $5.0 billion.

Net debt and Gearing: At the end of the third quarter 2022, net debt was $48.3 billion, compared with $46.4 billion at the end of the second quarter 2022, mainly reflecting lower cash flow from operating activities and the absorption of debt from the acquisition of Sprng Energy. Gearing was 20.3% at the end of the third quarter 2022, compared with 19.3% at the end of the second quarter 2022, mainly driven by the increase in net debt. 

Shell plc Chief Executive Officer, Ben van Beurden, commented:
"We are delivering robust results at a time of ongoing volatility in global energy markets. We continue to strengthen Shell's portfolio through disciplined investment and transform the company for a low-carbon future. At the same time we are working closely with governments and customers to address their short and long-term energy needs.

Today we are announcing a new share buyback programme resulting in an additional $4 billion of distributions, which we expect to complete by our Q4 2022 results announcement. Furthermore, we plan to increase the dividend per share (DPS) for the fourth quarter, which will be paid in March 2023, by an expected 15%, subject to Board approval." 

Highlights

• Robust performance in a turbulent economic environment with lower crude prices and higher gas prices compared with Q2 2022. Adjusted Earnings of $9.5 billion in Q3 2022, with Adjusted EBITDA of $21.5 billion.
• Strengthening and simplifying the portfolio through the energy transition with completion of the Sprng Energy (India) acquisition, participation in the North Field South LNG expansion (Qatar) in October, the Rosmari-Marjoram field FID (Malaysia), the announced Aera Energy divestment (California, USA) and the acquisition of Shell Midstream Partners (USA).
• Disciplined cash capex: expected to be in the $23 - 27 billion range in 2022, evenly split between our Growth, Transition and Upstream pillars.
• $4 billion share buybacks announced, expected to be completed by Q4 2022 results announcement; total distributions in excess of 30% of CFFO for the last four quarters. Subject to Board approval, intention to increase DPS by an expected 15% for the fourth quarter, which will be paid in March 2023. Announced 2022 shareholder distributions ~$26 billion.
• Wael Sawan to succeed Ben van Beurden as Chief Executive Officer, effective January 1, 2023. 
• CFFO of $12.5 billion for Q3 2022 is driven by lower Adjusted EBITDA compared with Q2 2022 and working capital outflows. In working capital, the inventory price help in Q3 2022 resulting from lower crude prices is more than offset by the European gas inventory build-up and initial margin outflows in our Renewable and Energy Solutions business as well as regular accounts receivable and payable movements across the portfolio. As a result, net debt increased by ~$2.0 billion (~4%), to $48.3 billion in Q3 2022, which includes the absorption of Sprng Energy's debt. 

Integrated gas

• Adjusted Earnings below Q2 2022 mainly reflecting lower trading and optimisation results in addition to lower volumes including the impact of maintenance and the Permitted Industrial Actions at Prelude.
• Trading and optimisation results impacted by seasonality and supply constraints, coupled with substantial differences between paper and physical realisation in a volatile and dislocated market.
• Q4 2022 outlook includes a similar level of midstream maintenance activities to Q3 2022.

Upsteam

• Strong operational performance in Deep Water, resulting in Upstream benefiting from high-value barrels in Q3 production mix.
• Adjusted Earnings benefited from non-cash provision releases and gains related to storage transfer effects in a joint venture.
• Production was lower than in Q2 2022, mainly driven by the derecognition of Salym in Russia, along with unscheduled deferments, partly offset by higher scheduled maintenance in Q2.

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