Shell Flags Earnings Hit of Up to $4.5 Billion From Impairments -- 2nd Update

By Christian Moess Laursen

Shell said its fourth-quarter earnings took a hit of between $2.5 billion and $4.5 billion in impairments that were offset by significantly higher gas trading, while its overall production volumes are on track to meet targets.

The London-based energy giant said Monday that the impairments were primarily driven by macro developments as well as portfolio choices, including its Singapore chemicals and products assets, which it has been trying to sell.

The FTSE 100 leader by market cap also said it expects its cash flow from operations to be hit by a $900 million charge from emissions permits in Germany and the U.S., The number of permits Shell is required to buy is determined by the amount of fuel sold and the emissions associated with that fuel. These payments typically take place in the fourth quarter.

Gains from integrated gas trading are expected to be significantly higher on-quarter, despite declining oil and gas prices throughout the period, with oil hitting a five-month low in early December, reflecting supply and demand concerns despite support from geopolitical uncertainty.

Analysts at Barclays forecast an 8% drop in earnings on-quarter across the European integrated energy sector, driven by lower oil prices and refining margins and seasonally higher costs, they write in a research note.

The quarterly result looks to be dragged by significantly lower trading from chemicals and crude oil refineries, which is anticipated to post an adjusted earnings loss, the fossil-fuel company said.

Shell expects to report integrated gas production between 880,000 and 920,000 oil-equivalent barrels a day for the fourth quarter, which would be in line with its guided range of 870,000-930,000 BOE a day, and compares with third-quarter production of 900,000 BOE a day.

Fourth-quarter volumes of liquefied natural gas--LNG--are expected to be between 6.9 million and 7.3 million metric tons compared with 6.9 million tons in the preceding quarter. Shell previously expected 6.7 million-7.3 million tons.

Upstream production--the extraction of crude oil and natural gas--is expected to meet the guided range of 1.75 million-1.95 million BOE a day at 1.83 million-1.93 million a day. It reported 1.75 million BOE a day in the third quarter.

Shell's quarterly result from retailing oil and other products such as lubricants is expected to be similar to the prior-year's same quarter, as sales volumes should be between 2.35 million and 2.75 million barrels a day, meeting the guided 2.25 million-2.75 million.

At 0904 GMT, shares were down 2.1% at 2,516.50 pence.

Write to Christian Moess Laursen at [e-mail]

(END) Dow Jones Newswires

January 08, 2024 04:54 ET (09:54 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.