What Did Shell (SHEL) Reveal in Its Update Pre Q3 Earnings?
Shell plc SHEL said that maintenance issues in the Prelude floating LNG facility, and Trinidad and Tobago resulted in decreased gas output in the third quarter. At the same time, the London-based supermajor sees considerably higher contributions from the Trading & Optimisation division, recovering from the previous quarter's slump.
Now, let’s dig into some other segment-wise selected items from Friday’s release.
Upstream
According to the latest update, Shell’s upstream production rose 2.9% on a sequential basis in the third quarter of 2023 at the midpoint of the guidance. The supermajor is estimating its output in the range of 1,700-1,800 (thousand barrels of oil equivalent per day) MBOE/d compared to 1,701 MBOE/d in the second quarter of 2023.
Tax charges are expected to hurt earnings in the range of $2.1-2.9 billion. Meanwhile, Shell expects the share of profit of joint ventures and associates to be around zero. The segment’s results are also likely to include well write-offs to the tune of $200 million. Finally, operating expense for the segment is projected at around $2.35 billion.
Integrated Gas
Shell’s LNG liquefaction volumes are expected in the range of 6.6-7 million tons, translating into a decrease of around 5.2% sequentially, hampered by maintenance activity. Shell’s integrated gas production is expected in the range of 880,000-920,000 barrels of oil equivalent per day (BOE/d) or 900,000 BOE/d at the midpoint. It was 985,000 BOE/d in the April-June period.
Per the company, third-quarter trading and optimization results in its integrated gas unit will be higher than the second quarter of 2023. Segment operating cost is expected between $1.1 billion and $1.3 billion.
Marketing
The midpoint of management’s marketing sales volume guidance is 2.650 million barrels per day, higher than the 2.607 million barrels achieved in the second quarter of 2023. Overall, segment profits are expected to be in line with the year-ago levels, while operating expenses would be between $2.1 billion and $2.5 billion.
Chemicals & Products
The company expects an upward trajectory in its Trading & Optimisation results from the second-quarter levels. Also, as projected by Shell, the refining margin should strengthen considerably in the third quarter, with the metric jumping 78% sequentially. But with chemical margins deteriorating, realized chemicals sub-segment numbers are expected to be in line with the second quarter. Shell also forecast refinery utilization of 82-86%, operating expense of $2.8-$3.2 billion and chemicals manufacturing plant utilization of 68-72%.
Renewables and Energy Solutions
The adjusted bottom line of this segment is expected to hover between a loss of $300 million and a profit of $300 million.
Q3 Estimates
This company, which consolidated its dual headquarters in London over The Hague and became a single UK entity last year, is slated to release third-quarter 2023 results on Nov 2. The current Zacks Consensus Estimate for Shell’s to-be-reported quarter is a profit of $1.84 per share.
Zacks Rank & Stock Picks
Shell carries a Zacks Rank #3 (Hold) at present. Meanwhile, investors interested in the energy sector might consider the operators mentioned below. These companies currently sport a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
HF Sinclair DINO: It beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other at an average of 10.4%.
DINO is valued at around $9.4 billion. HF Sinclair has seen its shares go down 6.2% in a year.
CVR Energy CVI: It beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. Over the past 60 days, CVR Energy saw the Zacks Consensus Estimate for 2023 move up 26.8%.
CVR Energy is valued at around $3.1 billion. CVI has seen its shares drop 9.6% in a year.
Matador Resources MTDR: It beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. Over the past 60 days, Matador Resources saw the Zacks Consensus Estimate for 2023 move up 5.1%.
Matador Resources is valued at around $6.6 billion. MTDR has seen its shares lose 10.8% in a year.
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