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Industrial Action Disrupts Shell's (SHEL) FLNG Operations

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Shell Plc SHEL recently stated that liquefied natural gas (“LNG”) shipments from the company’s Prelude floating facility, offshore northwest Australia, would be disordered for a minimum of two weeks due to work bans by unions fighting for an enhanced pay.

This standstill in operations at the 3.6-million-ton-a-year facility adds to the already challenging circumstances in the global LNG market as Europe hustles to secure cargoes to make up for the lost Russian gas supply as a consequence of Moscow’s invasion of Ukraine and the sanctions following it. To add to woes, Freeport LNG, one of the largest LNG plants in the United States, is also undergoing an extended outage.

In an email comment, Shell’s spokesperson said, “We have issued a notice to customers that cargoes will be impacted until at least mid-July due to the industrial action.”

Per Refinitiv data, the last cargo left the facility on Jun 26. On days with normal operations, the site generally takes about a week to 10 days to load a tanker. The disruption of work due to ongoing protests suggests that the loading of at least two cargoes will be prevented.

The 12-day industrial action was commenced by workers on Jun 10 over a pay disagreement, which has now been extended to Jul 14.

Shell has been in negotiation with the Australian Workers’ Union, offering to increase offshore allowances and other benefits. However, the union mentioned that SHEL is yet to meet some of its demands, including one that would stop Shell from hiring contract workers at a lower pay than the company’s employees doing the same job.

The London-headquartered oil supermajor owns a 67.5% interest in the FLNG facility, with Japan’s Inpex holding a 17.5% stake, Korea’s Kogas 10% and Taiwan’s CPC owing the remaining 5%.

Shell plc operates as an energy and petrochemical company. It explores and extracts crude oil, natural gas and natural gas liquids. Further, it markets and transports oil and gas and produces gas-to-liquid fuels and other products.

Shell currently has a Zacks Rank #2 (Buy). Investors interested in the energy space might look at some other top-ranked stocks — Murphy USA MUSA, Delek US Holdings DK and CNX Resources CNX — each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Murphy USA’s 2022 earnings per share (EPS) has been revised upward by about 36.2% over the past 60 days from $12.88 to $17.54.

MUSA beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, the average being 49.1%.

The Zacks Consensus Estimate for Delek’s 2022 EPS has been revised upward by about 209.4% over the past 60 days from $1.91 to $5.91.

The Zacks Consensus Estimate for DK’s 2022 earnings is projected at $5.91 per share, up by 295% from the projected year-ago loss of $3.03.

The Zacks Consensus Estimate for CNX Resources’ 2022 earnings is pegged at $3 per share, up 86.3% from the projected year-ago earnings of $1.61.

The Zacks Consensus Estimate for CNX’s 2022 earnings has been revised about 14.5% upward over the past 60 days from $2.62 per share to $3.


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