On an energy tightrope

If you were in the ultimate squeaky bum position of personal investment adviser to Vladimir Putin and keen to avoid the oneway trip to the basements of Lubyanka, the sensible approach would have been to build up a long position in oil and gas majors the moment the boss glanced towards Ukraine.

Since the invasion, the disruption to energy markets has seen the majors pouring out cash to an extent that may seem fairly obscene to anybody struggling to pay their heating bills.

Shell may be trading at a much lower multiple than its US competitors, but it has reported record first-quarter profits despite oil and gas prices falling from the highs of 2022.

Its adjusted earnings for the quarter came in at a handsome $9.6bn, and it returned $6.3bn to shareholders via $2bn of dividends and $4.3bn of share buybacks. While the average price of Brent crude in the quarter was down to $81 from $96 in 2022, higher liquefied natural gas production in Australia and an improved trading performance more than made up for it.

The company is investing in lower-carbon energy sources such as wind and hydrogen, but its new CEO, Wael Sawan, has said that he would consider a boost in oil production rather than letting it drop by 1%-2% a year as Shell had previously promised.

Shell spent a third of its $64bn combined operating and capital expenditure in 2022 on low- and zero-carbon projects. While activists might think this is not enough, US investors seem to think it’s too much.

It was never going to be easy to merge two apparently disparate operations into one coherent whole