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SHEL to Review $30B UK Investments Due to the Windfall Tax

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Shell (SHEL - Free Report) will be re-evaluating its plan to spend as much as $30 billion (£25 billion) on U.K. operations over the next decade after the government decided to augment the windfall tax on oil and gas producers.

Earlier in 2022, the oil supermajor revealed its intent to invest somewhere between 20 and 25 billion pounds in the country’s energy system over the next 10 years. More than 75% of the investment was intended for low and zero-carbon products and services comprising offshore wind, hydrogen, carbon capture utilization and storage and electric mobility.

Recently, the UK raised the windfall tax on the profits of oil and gas operators in the North Sea while expanding the tax on low-cost electricity generators. British finance minister Jeremy Hunt announced plans to increase the windfall tax to 35% from the existing 25%.

The country started levying the windfall tax on oil and gas firms operating in May 2022 when the incumbent Prime Minister Rishi Sunak, then Boris Johnson’s Chancellor of the Exchequer, declared the temporary 25% Energy Profits Levy for oil and gas companies, reflecting their extraordinary profits as energy prices surged.

The UK is now raising the Energy Profits Levy by 10 percentage points to 35% from Jan 1, 2023, and is extending it to the end of March 2028 from Dec 31, 2025, as originally planned when the levy was 25%.

Shell’s U.K. Country Chair David Bunch stated that the company would now evaluate each project on a case-by-case basis. "When you tax more you're going to have less disposable income in your pocket, less to invest," he further added.

Shell is one of the primary oil supermajors, a group of U.S. and Europe-based big energy multinationals with operations spanning worldwide. The company is fully integrated as it participates in every aspect related to energy, from oil production to refining and marketing. SHEL operates as an energy and petrochemical company.

Shell currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the energy space that warrant a look include Halliburton (HAL - Free Report) , Patterson-UTI (PTEN - Free Report) and HF Sinclair (DINO - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Halliburton’s 2022 earnings stands at $2.09 per share, which suggests an increase of 93.5% from the year-ago earnings of $1.08.

HAL beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, the average being around 5.5%.

The consensus estimate for Patterson’s 2022 earnings is pegged at 54 cents per share, which implies an increase of about 128% from the year-ago loss of $1.93.

PTEN beat estimates for earnings in three of the trailing four quarters, the average being around 169.2%.

The Zacks Consensus Estimate for HF Sinclair’s 2022 earnings has been revised about 11.7% upward over the past 60 days from $14.26 per share to $15.93.

The consensus mark for DINO’s 2022 earnings is pegged at $15.93 per share, up 948% from the year-ago earnings of $1.52.

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