Shell expects major boost to Q4 gas trading
SHELL said its earnings from gas trading would be significantly higher in the fourth quarter, but profits from buying and selling oil products and chemicals will be lower.
The London-based major said it benefited from seasonal shifts in the gas market and higher production of the liquefied form of the fuel, which has been a key driver of profits. Shell expects its chemicals and oil products division to make a loss for the period, it said in a trading update on Monday (Jan 8).
Shell’s earnings met expectations in the prior quarter, in what was a mixed results season for oil majors. The company accelerated the pace of buybacks and chief executive officer Wael Sawan has committed to boosting shareholder returns. Shell is due to report fourth-quarter results on Feb 1.
“Overall, we see the statement as neutral, given a reasonable operational result,” RBC Europe Ltd analyst Biraj Borkhataria said in a note. “However, earnings continue to be dragged down by a weak performance from its chemicals division.”
Shell’s gas trading division has proved to be a major moneymaker since Russia’s invasion of Ukraine increased volatility in the price of the fuel. The company narrowed its production range for gas to 880,000 to 920,000 barrels equivalent of oil a day, and increased the lower end of its liquefaction forecasts to 6.9 million tons, from 6.7 million previously.
Trading and optimisation from Shell’s chemicals and oil products division “is expected to be significantly lower” than in the previous quarter, the firm said.
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Lower oil trading results in the fourth quarter are “typical” of the period because of “lower liquidity and volatility”, Borkhataria said.
Profit from Shell’s chemicals unit, which is a sizable part of its operations but plays second fiddle to oil and gas, is expected to be flat compared to the previous year. Chemicals utilisation is now seen lower at between 60 and 64 per cent, but the company’s indicative margin will increase on the quarter by US$10 to US$125 per ton.
The company also narrowed its forecast range for upstream production volume to 1.83 million to 1.93 million barrels a day.
Shell will take non-cash post-tax impairments of between US$2.5 billion and US$4.5 billion in the fourth quarter. The company said that these were mostly driven by macroeconomic and external developments “as well as portfolio choices, including the Singapore Chemicals & Products assets”. BLOOMBERG
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