5th Apr 2024 11:52
(Alliance News) - Shell PLC's quarterly update was seen as broadly positive, with volumes across all businesses better than expected, analysts on Friday said.
Shares in Shell rose 0.2% to 2,768.50 pence each in London on Friday. The broader FTSE 100 was down 1.0%.
On Friday, Shell cautioned that results from its Integrated Gas division in the first-quarter are expected to be "significantly lower" than in the fourth, and said it expects write-offs worth USD600 million in its Upstream arm.
The London-based oil major expects Integrated Gas adjusted earnings before tax and depreciation between USD1.2 billion and USD1.6 billion.
"Trading & optimisation results are expected to be strong, but significantly lower than an exceptional Q4," it commented.
Shell forecast production of 960 to 1,000 thousand barrels of oil equivalent per day and liquefied natural gas liquefaction volumes between 7.2 million tonnes and 7.6 million tonnes in the first three months of 2024.
These were increased from ranges of 930 to 990kboe/d and 7.0 to 7.6mt previously.
In Upstream, Shell warned of USD600 million in exploration well write-offs, largely in Albania. It expects adjusted earnings before tax and depreciation between USD2.7 billion and USD3.1 billion.
Upstream production is forecast between 1,820 to 1,920 kboe/d.
Elsewhere, in Chemicals & Products, "trading & optimisation is expected to be significantly higher" than a quarter earlier. For this division, Shell predicts adjusted earnings before tax and depreciation between USD0.8 billion and USD1.0 billion.
Marketing results are forecast to be in line with the fourth quarter, with adjusted earnings before tax and depreciation of between USD0.3 billion and USD0.7 billion.
In Renewables & Energy Solutions, it has an adjusted earnings outlook ranging from a USD100 million loss to a USD500 million profit, while in Corporate the adjusted loss range is between USD0.4 billion to USD0.6 billion.
Analysts at Jefferies felt overall it was a "positive update".
"Trading guidance addresses concerns around gas trading normalization," the broker said.
"Volumes across all businesses look better than expected, and we expect [Integrated Gas] liquefaction volumes to fall at the upper end of the revised 7.2 to 7.6mt guidance."
But Jefferies said it saw around 10% downside relative to consensus earnings due to higher than expected tax rates in both IG and Upstream.
Shell estimated the first quarter tax charge would fall between USD2.3 to USD3.1 billion, ahead of Jefferies' USD2.0 billion forecast.
Shell also highlighted that derivative movements and working capital estimates inherently have a "broad range of uncertainty" which could have a combined impact ranging from negative USD4 billion to plus USD4 billion.
Jefferies retained a 'buy' rating on Shell.
AJ Bell's Russ Mould was slightly less enthused.
"Shell has teased its quarterly results ahead of time and despite a recent surge in commodity prices there isn’t a huge amount to draw people in for the main event," he commented.
"The company’s crucial integrated gas division is flagged to have delivered a strong performance in the first quarter but one which falls short of an exceptional final quarter of last year," he noted.
"On the flipside, production and LNG volume guidance for this part of the business has been upped and the company’s refining and chemicals arm enjoyed a better three months than it did in the last part of 2023," he pointed out.
"The latest update is a reminder of how many moving parts there are in Shell’s business. While this brings added complexity it also allows for some diversification which is useful given its exposure to volatile oil and gas prices," he added.
"Chief executive Wael Sawan is keen to play catch-up with Shell’s US rivals which are afforded more generous valuations by the market and has insisted that while the company still remains committed to its net-zero ambitions, investments have to pay their way. The flagged losses in its renewables arm feel significant in this context," Mould felt.
By Jeremy Cutler, Alliance News reporter
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