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FTSE 100: Shell share price rises on oil and gas assets upgrade

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Shares in the FTSE 100 oil giant pushed higher in early trade following the news. Photo: Reuters/Marcos Brindicci
Shares in the FTSE 100 oil giant pushed higher in early trade following the news. Photo: Reuters/Marcos Brindicci

Shares in Shell (SHEL.L) rose on Wednesday after it upgraded what it thinks it will be paid for its oil and gas over the coming years as the Ukraine war drove energy prices to record highs in recent months.

The FTSE 100 (^FTSE) company's shares gained more than 2% in early trade in London, up 1% at the time of writing.

It revealed a $1bn (£0.84bn) windfall from soaring energy prices and revised up to $4.5bn (£3.8bn) in previous writedowns for this quarter.

It took a $3.9bn impairment in the first quarter stemming from its planned exit from assets in Russia.

The trading update on Thursday is the first indicator of just how much cash was flowing into the coffers of major oil stalwarts due to inflationary surge in oil and gas prices that has left motorists forking out record sums at forecourts.

Europe's biggest oil and gas group told shareholders: "In the second quarter 2022, Shell has revised its mid- and long-term oil and gas commodity prices, reflecting the current macroeconomic environment as well as updated energy market demand and supply fundamentals.

"This resulted in a review of Shell’s upstream and integrated gas previously impaired assets."

Shell indicative refining margin jumped to $28.04 a barrel in the second quarter, up from $10.23 in the first three months of the year, it said. This is expected to have a positive impact of between $800m and $1.2bn.

Its Renewables and Energy Solutions division, is forecast to report adjusted earnings of between $400m and $900m for the second quarter amid an "exceptional market environment".

Investors were also told the company will produce more gas during the second quarter of the year than previously thought amid the global energy crisis.

It expects to extract between 930,000 and 980,000 barrels of oil equivalent per day from its integrated gas operations, an upgrade from its previous estimate of between 910,000 and 960,000, released in May.

Shell, the world's largest trader of liquefied natural gas, expects it quarterly LNG production to be in a range of 7.4 to 8 million tonnes following the removal of LNG volumes from the Sakhalin-2 plant in eastern Russia which it exited following the invasion of Ukraine.

Read more: Oil swings as fuel prices cling to record highs

It came as oil prices edged higher on Thursday despite cooling in recent days. International benchmark brent (BZ=F) rose 0.1% to $100.81 a barrel, while US light crude (CL=F) was up 0.1% to $98.61 at the time of writing.

Meanwhile, average petrol prices neared a record highs. Petrol rose to 191.36p on Tuesday, just a fraction shy of the current record high of 191.53p. while diesel hit 198.91 a litre, according to RAC.

Watch: Why are gas prices rising?