Shell reports $9 billion profit in Q1 2023

Shell plc (LON:SHEL) has announced its 2023 first quarter unaudited results.

SUMMARY OF UNAUDITED RESULTS
Quarters												$ million
Q1 2023			Q4 2022			Q1 2022			%¹																		Reference
8,709			10,409			7,116			-16			Income/(loss) attributable to Shell plc shareholders
9,646			9,814			9,130			-2			Adjusted Earnings															A
21,432			20,600			19,028			+4			Adjusted EBITDA															A
14,159			22,404			14,815			-37			Cash flow from operating activities
(4,238)			(6,918)			(4,273)						Cash flow from investing activities
9,921			15,486			10,542						Free cash flow															G
6,501			7,319			5,064						Cash capital expenditure															C
9,312			11,114			9,457			-16			Operating expenses															F
9,293			11,037			9,256			-16			Underlying operating expenses															F
17.2%			16.7%			9.3%						ROACE on a Net income basis															D
15.9%			15.8%			10.6%						ROACE on an Adjusted Earnings plus Non-controlling interest (NCI) basis															D
44,224			44,837			48,489						Net debt															E
18.4%			18.9%			21.3%						Gearing															E
2,902			2,831			2,962			+2			Total production available for sale (thousand boe/d)
1.26			1.47			0.94			-14			Basic earnings per share ($)
1.39			1.39			1.20			—			Adjusted Earnings per share ($)															B
0.2875			0.2875			0.2500			—			Dividend per share ($)

1.Q1 on Q4 change

Quarter Analysis1

Income attributable to Shell plc shareholders, compared with the fourth quarter 2022, mainly reflected unfavourable tax movements, and lower realised oil and gas prices, partly offset by lower operating expenses and higher Chemicals and Products trading and optimisation results.

First quarter 2023 income attributable to Shell plc shareholders also included impairment charges of $0.5 billion. These charges are included in identified items amounting to a net loss of $0.5 billion in the quarter. This compares with identified items in the fourth quarter 2022 which amounted to a net gain of $1.5 billion.

Adjusted Earnings andAdjusted EBITDA2 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 positive $0.5 billion.

Cash flow from operating activities for the first quarter 2023 was $14.2 billion, and included a working capital outflow of $0.8 billion, and tax payments of $3.1 billion. The working capital outflow mainly reflected the reversal of temporary deposits from joint ventures received in the fourth quarter 2022, and other accounts receivable and payable movements, partly offset by initial margins inflows, and lower prices and inventories.
Cash flow from investing activities for the quarter was an outflow of $4.2 billion, and included capital expenditure of $6.2 billion, which includes the acquisition of Nature Energy Biogas A/S for nearly $2 billion, and divestment proceeds of $1.7 billion.

Net debt and Gearing: At the end of the first quarter 2023, net debt was $44.2 billion, compared with $44.8 billion at the end of the fourth quarter 2022. Gearing was 18.4% at the end of the first quarter 2023, compared with 18.9% at the end of the fourth quarter 2022, driven by net debt reduction and higher equity.

Shareholder distributions

Total shareholder distributions in the quarter amounted to $6.3 billion. Dividends declared to Shell plc shareholders for the first quarter 2023 amount to $0.2875 per share. Shell has now completed the $4 billion of share buybacks announced in

the fourth quarter 2022 results announcement. Today, Shell announces a share buyback programme of $4 billion which is expected to be completed by the second quarter 2023 results announcement.

This announcement, together with supplementary financial and operational disclosure for this quarter, is available at www.shell.com/investors3.

1. All earnings amounts are shown post-tax, unless stated otherwise.
2. Adjusted EBITDA is without taxation.
3. Not incorporated by reference.

FIRST QUARTER 2023 PORTFOLIO DEVELOPMENTS

Upstream

In February 2023, we completed the previously announced sale of our 100% interest in Shell Onshore Ventures LLC which holds a 51.8% membership interest in Aera Energy LLC, based in the USA, to IKAV.

In February 2023, we announced the commencement of production at the Shell-operated Vito floating production facility in the US Gulf of Mexico, owned by Shell Offshore Inc. (63.1%) and Equinor (36.9%).

In March 2023, we announced the completion of the withdrawal from our 50% interest in the Salym project in Russia, which had been jointly developed with Gazprom Neft, a subsidiary of Gazprom.

In March 2023, we completed the previously announced sale of our stake in two offshore production-sharing contracts in Malaysia’s Baram Delta to Petroleum Sarawak Exploration & Production Sdn. Bhd.

In April 2023, we completed the restart of operations at the Pierce field in the UK North Sea after a major redevelopment to enable gas production, after years of the field producing only oil. Pierce is a joint arrangement between Shell (92.52%) and Ithaca Energy (UK) Limited (7.48%).
Marketing

In February 2023, we completed the acquisition of 100% of the shares of Nature Energy Biogas A/S, based in Denmark.

PERFORMANCE BY SEGMENT

INTEGRATED GAS
Quarters												$ million
Q1 2023			Q4 2022			Q1 2022			%¹						Reference
2,410			5,293			3,079			-54			Segment earnings
(2,506)			(675)			(1,013)						Of which: Identified items			A
4,917			5,968			4,093			-18			Adjusted Earnings			A
7,482			8,332			6,315			-10			Adjusted EBITDA			A
6,286			6,409			6,443			-2			Cash flow from operating activities
813			1,527			863						Cash capital expenditure			C
138			123			120			+12			Liquids production available for sale (thousand b/d)
4,825			4,607			4,504			+5			Natural gas production available for sale (million scf/d)
970			917			896			+6			Total production available for sale (thousand boe/d)
7.19			6.78			8.00			+6			LNG liquefaction volumes (million tonnes)
16.97			16.82			18.29			+1			LNG sales volumes (million tonnes)

1.Q1 on Q4 change

Integrated Gas includes liquefied natural gas (LNG), conversion of natural gas into gas-to-liquids (GTL) fuels and other products. It includes natural gas and liquids exploration and extraction, and the operation of the upstream and midstream infrastructure necessary to deliver these to market. Integrated Gas also includes the marketing, trading and optimisation of LNG, including LNG as a fuel for heavy-duty vehicles.

Quarter Analysis1

Segment earnings, compared with the fourth quarter 2022, reflected the effect of lower realised prices (decrease of $597 million), and unfavourable deferred tax movements (decrease of $370 million), partly offset by higher volumes (increase of $175 million), and lower operating expenses (decrease of $105 million).

First quarter 2023 segment earnings also included unfavourable movements of $2,188 million due to the fair value accounting of commodity derivatives and impairment charges of $262 million in Australia. As part of Shell’s normal business, commodity derivative hedge contracts are entered into for mitigation of economic exposures on future purchases and sales. As these commodity derivatives are measured at fair value, this creates an accounting mismatch over periods. These unfavourable movements and impairment charges are part of identified items and compare with the fourth quarter 2022 which included unfavourable movements of $708 million due to the fair value accounting of commodity derivatives.

Adjusted Earnings andAdjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items.

Cash flow from operating activities for the quarter was primarily driven by Adjusted EBITDA, and working capital inflows of $2,121 million, partly offset by net cash outflows related to derivatives of $2,417 million, and tax payments of $884 million.

Total oil and gas production, compared with the fourth quarter 2022, increased by 6% mainly due to lower maintenance at Prelude, and the ramp-up of new fields, partly offset by higher fields decline. LNG liquefaction volumes increased by 6% mainly due to lower maintenance at Prelude.

1. All earnings amounts are shown post-tax, unless stated otherwise.
2. Adjusted EBITDA is without taxation.

UPSTREAM
Quarters													$ million
Q1 2023				Q4 2022			Q1 2022			%¹								Reference
2,779				1,380			3,095			+101			Segment earnings
(21)				(1,681)			(355)						Of which: Identified items					A
2,801				3,061			3,450			-9			Adjusted Earnings					A
8,837				9,418			8,977			-6			Adjusted EBITDA					A
5,808				7,224			5,964			-20			Cash flow from operating activities
1,870				1,845			1,707						Cash capital expenditure					C
1,346				1,331			1,403			+1			Liquids production available for sale (thousand b/d)
3,078				3,067			3,606			—			Natural gas production available for sale (million scf/d)
1,877				1,859			2,025			+1			Total production available for sale (thousand boe/d)

1.Q1 on Q4 change
The Upstream segment includes exploration and extraction of crude oil, natural gas and natural gas liquids. It also markets and transports oil and gas, and operates the infrastructure necessary to deliver them to the market.

Quarter Analysis1

Segment earnings, compared with the fourth quarter 2022, mainly reflected lower prices (decrease of $188 million), timing of liftings (decrease of $305 million), and favourable tax movements in the fourth quarter 2022 (decrease of $543 million), partly offset by lower operating expenses (decrease of $286 million), lower exploration expenses and well write-offs (decrease of $148 million) and lower depreciation (decrease of $105 million).
First quarter 2023 segment earnings also included charges of $111 million relating to impairments, and deferred tax charges of $132 million due to amendments to IAS 12, partly offset by gains of $73 million due to the fair value accounting of commodity derivatives, gains of $70 million from disposal of assets, and gains of $48 million related to the impact of the strengthening Brazilian real on a deferred tax position. These gains and losses are part of identified items, and compare with the fourth quarter 2022 which included charges of $1,385 million relating to the EU solidarity contribution and $441 million relating to the UK Energy Profits Levy, partly offset by favourable movements of $304 million due to the fair value accounting of commodity derivatives.

Adjusted Earnings andAdjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items.

Cash flow from operating activities for the quarter was primarily driven by Adjusted EBITDA, partly offset by tax payments of $2,019 million, the timing impact of dividends from joint ventures and associates of $514 million, and working capital outflows of $475 million.

Total production, compared with the fourth quarter 2022, increased mainly due to lower scheduled maintenance and lower unscheduled deferment, partly offset by divestments.

1. All earnings amounts are shown post-tax, unless stated otherwise.
2. Adjusted EBITDA is without taxation.

MARKETING
Quarters													$ million
Q1 2023				Q4 2022			Q1 2022			%¹								Reference
1,137				375			165			+203			Segment earnings²
262				(72)			(572)						Of which: Identified items					A
874				446			737			+96			Adjusted Earnings²					A
1,578				1,045			1,323			+51			Adjusted EBITDA2					A
1,086				1,062			(530)			+2			Cash flow from operating activities
2,685				1,993			473						Cash capital expenditure					C
2,446				2,543			2,372			-4			Marketing sales volumes (thousand b/d)

1. Q1 on Q4 change
2. Segment earnings, Adjusted Earnings and Adjusted EBITDA are presented on a CCS basis (see Note 2).

The Marketing segment comprises the Mobility, Lubricants, and Sectors & Decarbonisation businesses. The Mobility business operates Shell’s retail network including electric vehicle charging services. The Lubricants business produces, markets and sells lubricants for road transport, and machinery used in manufacturing, mining, power generation, agriculture and construction. The Sectors & Decarbonisation business sells fuels, speciality products and services including low-carbon energy solutions to a broad range of commercial customers including the aviation, marine, commercial road transport and agricultural sectors.

Quarter Analysis1

Segment earnings, compared with the fourth quarter 2022, reflected higher Marketing margins (increase of $330 million) mainly driven by the Lubricants and Sectors & Decarbonisation businesses, partly offset by seasonal impacts in Mobility. The first quarter 2023 also included lower operating expenses (decrease of $166 million).

First quarter 2023 segment earnings also included a gain of $210 million related to one-off indirect tax credits. This gain is part of identified items, and compares with the fourth quarter 2022 which included impairment charges of $85 million.

Adjusted Earnings andAdjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items.

Cash flow from operating activities for the quarter was primarily driven by Adjusted EBITDA, partly offset by working capital outflows of $355 million, and non-cash cost-of-sales (CCS) adjustments of $156 million.

Marketing sales volumes (comprising hydrocarbon sales), compared with the fourth quarter 2022, decreased mainly due to seasonal effects.

1. All earnings amounts are shown post-tax, unless stated otherwise.
2. Adjusted EBITDA is without taxation.

CHEMICALS AND PRODUCTS
Quarters													$ million
Q1 2023				Q4 2022			Q1 2022			%¹								Reference
1,799				332			1,072			+442			Segment earnings²
22				(412)			(96)						Of which: Identified items					A
1,777				744			1,168			+139			Adjusted Earnings²					A
3,050				1,574			2,006			+94			Adjusted EBITDA2					A
2,290				3,119			3,673			-27			Cash flow from operating activities
613				786			998						Cash capital expenditure					C
1,413				1,434			1,397			-1			Refinery processing intake (thousand b/d)
1,706				1,800			1,598			-5			Refining & Trading sales volumes (thousand b/d)
2,831				3,017			3,330			-6			Chemicals sales volumes (thousand tonnes)

1. Q1 on Q4 change
2. Segment earnings, Adjusted Earnings and Adjusted EBITDA are presented on a CCS basis (see Note 2).

The Chemicals and Products segment includes chemicals manufacturing plants with their own marketing network, and refineries which turn crude oil and other feedstocks into a range of oil products which are moved and marketed around the world for domestic, industrial and transport use. The segment also includes the Pipeline business, Trading of crude oil, oil products and petrochemicals, and Oil Sands activities (the extraction of bitumen from mined oil sands and its conversion into synthetic crude oil).

Quarter Analysis1

Segment earnings, compared with the fourth quarter 2022, reflected higher Products margins (increase of $492 million) mainly driven by higher contributions from trading and optimisation partly offset by lower refining margins. Segment earnings also reflected higher Chemicals margins (increase of $378 million) due to lower feedstock and utility costs. In addition, the first quarter reflected lower operating expenses (decrease of $289 million) including phasing effects.

First quarter 2023segment earnings also included favourable movements of $134 million due to the fair value accounting of commodity derivatives, and impairment charges of $72 million. These gains and losses are part of identified items, and compare with the fourth quarter 2022 which included unfavourable movements of $214 million due to the fair value accounting of commodity derivatives, legal provisions of $86 million, impairment charges of $84 million and tax charges relating to the EU solidarity contribution of $74 million.
Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items. In the first quarter 2023, Chemicals had negative adjusted earnings of $332 million and Products had positive adjusted earnings of $2,109 million.

Cash flow from operating activities for the quarter was primarily driven by Adjusted EBITDA, and cash inflows relating to commodity derivatives of $813 million, partly offset by working capital outflows of $804 million, non-cash cost-of-sales (CCS) adjustments of $504 million, and tax payments of $150 million.

Chemicals manufacturing plant utilisation was 71% compared with 75% in the fourth quarter 2022, due to economic optimisation and the slower than expected ramp-up of Shell Polymers Monaca.

Refinery utilisation was 91% compared with 90% in the fourth quarter 2022.

1. All earnings amounts are shown post-tax, unless stated otherwise.
2. Adjusted EBITDA is without taxation.

RENEWABLES AND ENERGY SOLUTIONS
Quarters													$ million
Q1 2023				Q4 2022			Q1 2022			%¹								Reference
2,200				4,673			(1,536)			-53			Segment earnings
1,810				4,379			(1,880)						Of which: Identified items					A
389				293			344			+33			Adjusted Earnings					A
668				396			521			+69			Adjusted EBITDA					A
1,091				2,674			(459)			-59			Cash flow from operating activities
440				1,076			985						Cash capital expenditure					C
68				66			56			+4			External power sales (terawatt hours)2
221				241			257			-8			Sales of pipeline gas to end-use customers (terawatt hours)3

1. Q1 on Q4 change
2. Physical power sales to third parties; excluding financial trades and physical trade with brokers, investors, financial institutions, trading platforms, and wholesale traders.
3. Physical natural gas sales to third parties; excluding financial trades and physical trade with brokers, investors, financial institutions, trading platforms, and wholesale traders. Excluding sales of natural gas by other segments and LNG sales.

Renewables and Energy Solutions includes renewable power generation, the marketing and trading and optimisation of power and pipeline gas, as well as carbon credits, and digitally enabled customer solutions. It also includes the production and marketing of hydrogen, development of commercial carbon capture and storage hubs, investment in nature-based projects that avoid or reduce carbon emissions, and Shell Ventures, which invests in companies that work to accelerate the energy and mobility transformation.

Quarter Analysis1

Segment earnings, compared with the fourth quarter 2022, reflected lower operating expenses, partly offset by lower net trading and optimisation results due to continued price volatility primarily in European markets, and higher taxes.
First quarter 2023segment earnings also included favourable movements of $1,815 million due to the fair value accounting of commodity derivatives. As part of Shell’s normal business, commodity derivative hedge contracts are entered into for mitigation of economic exposures on future purchases, sales and inventory. As these commodity derivatives are measured at fair value, this creates an accounting mismatch over periods. These favourable movements are part of identified items and compare with the fourth quarter 2022 which included favourable movements of $4,748 million due to the fair value accounting of commodity derivatives, and impairment charges of $361 million.

Adjusted Earnings andAdjusted EBITDA2 were driven by the same factors as the segment earnings and adjusted for identified items.

Cash flow from operating activities for the quarter was primarily driven by Adjusted EBITDA, and working capital inflows of $546 million, partly offset by net cash outflows related to derivatives of $143 million.

1. All earnings amounts are shown post-tax, unless stated otherwise.
2. Adjusted EBITDA is without taxation.

Additional Growth Measures

Quarters
Q1 2023			Q4 2022			Q1 2022			%¹
												Renewable power generation capacity (gigawatt):
2.3			2.2			0.5			+4			– In operation2
4.0			4.2			2.5			-3			– Under construction and/or committed for sale3

1. Q1 on Q4 change
2. Shell’s equity share of renewable generation capacity post commercial operation date. It excludes Shell’s equity share of associates where information cannot be obtained and prior period comparatives have been revised accordingly.
3. Shell’s equity share of renewable generation capacity under construction and/or committed for sale under long-term offtake agreements (PPA). It excludes Shell’s equity share of associates where information cannot be obtained and prior period comparatives have been revised accordingly.

CORPORATE
Quarters										$ million
Q1 2023				Q4 2022			Q1 2022								Reference
(1,064)				(654)			(736)			Segment earnings
(24)				(28)			(187)			Of which: Identified items					A
(1,039)				(626)			(548)			Adjusted Earnings					A
(183)				(164)			(114)			Adjusted EBITDA					A
(2,403)				1,916			(277)			Cash flow from operating activities

The Corporate segment covers the non-operating activities supporting Shell, comprising Shell’s holdings and treasury organisation, its self-insurance activities and its headquarters and central functions. All finance expense and income and related taxes are included in Corporate segment earnings rather than in the earnings of business segments.

Quarter Analysis1

Segment earnings, compared with the fourth quarter 2022, were impacted by one-off tax charges, unfavourable movements in net interest expense and currency exchange rate effects.
Adjusted EBITDA2 was mainly driven by unfavourable currency exchange rate effects.

1. All earnings amounts are shown post-tax, unless stated otherwise.
2. Adjusted EBITDA is without taxation.

OUTLOOK FOR THE SECOND QUARTER 2023

Cash capital expenditure is expected to be within the $23 – 27 billion range for the full year.

Integrated Gas production is expected to be approximately 920 – 980 thousand boe/d. LNG liquefaction volumes are expected to be approximately 6.8 – 7.4 million tonnes.

Upstream production is expected to be approximately 1,600 – 1,800 thousand boe/d.

Marketing sales volumes are expected to be approximately 2,350 – 2,850 thousand b/d.

Refinery utilisation is expected to be approximately 85% – 93%. Chemicals manufacturing plant utilisation is expected to be approximately 62% – 70%, reflecting ongoing economic optimisation due to the continuing low-margin environment and a slower than expected ramp-up of Shell Polymers Monaca.

Corporate Adjusted Earnings are expected to be a net expense of approximately $400 – $600 million in the second quarter 2023 and a net expense of approximately $2,200 – $2,600 million for the full year 2023. This excludes the impact of currency exchange rate effects.

FORTHCOMING EVENTS

Shell’s Annual General Meeting is scheduled on May 23, 2023. The “Capital Markets Day 2023” event is scheduled on June 14, 2023. Second quarter 2023 and half year results and dividends are scheduled to be announced on July 27, 2023. Third quarter 2023 results and dividends are scheduled to be announced on November 2, 2023.