The world’s largest integrated oil and gas company, Saudi Aramco (the Saudi Arabian Oil Company), reported a net income of $161.1 billion for 2022. This marks the highest-ever annual profit delivered by an oil and gas company. Interestingly, higher crude oil prices and strong demand during the year drove the results of all the oil majors, including Shell (NYSE: SHEL) which posted a record adjusted annual profit of $39.9 billion (up 107% year-over-year) last month.
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Saudi Aramco’s net income surged 46.5% year-over-year in 2022. Also, free cash flow grew 38.1% to $148.5 billion and helped Aramco declare a dividend of $19.5 billion for the fourth quarter. Buoyed by a strong performance, the company increased the dividend payout by 4% from the previous payout. Further, the board has recommended distributing a 1-for-10 bonus share to eligible shareholders.
Going ahead, Aramco plans to strengthen its capacity further by increasing its capital expenditure this year to between $45 billion and $55 billion. Aramco President & CEO Amin H. Nasser said, “Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real — including contributing to higher energy prices.”
Oil prices skyrocketed last year due to strong demand following the reopening of the economy. Also, Russia’s invasion of Ukraine led to major supply constraints and further price gains. However, oil prices began to decline in the second half of 2022 due to uncertainty and high inflation.
On a positive note, the Organization of the Petroleum Exporting Countries (OPEC) monthly report states that global oil demand is expected to rise by 2.32 million barrels per day. The key reason is China’s relaxation of COVID-19 restrictions and its positive impact on the world.
While this bodes well for all the oil companies, let’s check what the Street projects for Shell.
Is Shel Stock a Buy?
Overall, Shell scores a Moderate Buy consensus rating backed by five Buys, two Holds, and one Sell. The average SHEL price target of $69.61 suggests 15.32% upside potential from current levels.
It is worth highlighting that SHEL stock has a maximum Smart Score of “Perfect 10” on TipRanks. Note that shares with a “Perfect 10” Smart Score have historically outperformed the S&P 500 Index (SPX) by a wide margin.
