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Shell Expects To Take A $200M Hit From Texas Winter Storm

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support@smarteranalyst.com (Ben Mahaney)
·2 min read
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Royal Dutch Shell provided an update to its first-quarter outlook on Wednesday and expects that the winter storm in Texas will result in the oil major’s adjusted earnings taking a hit of $200 million.

Royal Dutch Shell’s (RDS.A) integrated gas division is expected to produce between 920 thousand to 960 thousand barrels of oil each day while liquefied natural gas (LNG) volumes are expected to range between 7.8 to 8.4 million tonnes.

The company also expects integrated gas operating cash flow to be negatively impacted as a result of higher outflows in working capital due to a rise in receivables from higher commodity prices.

Shell expects adjusted earnings to be positive for the upstream business unit in 1Q “capturing the upside from the current commodity price environment.” However, the company’s upstream unit will see a fall in production by 10 thousand to 20 thousand barrels per day in 1Q due to the winter storm in Texas.

Shell foresees utilization of refineries to range between 71% to 75% in 1Q. (See Royal Dutch Shell stock analysis on TipRanks)

Last week, Piper Sandler analyst Ryan Todd raised the price target from $48 to $55 and reiterated a Buy rating on the stock. Todd was optimistic about the long-term outlook on both crude and refining margins for the independent refineries and sees “compelling momentum on shareholder distributions and significant upside potential should crude markets continue to tighten further.”

The rest of the Street is cautiously optimistic on the stock with a Moderate Buy consensus rating. That’s based on 4 analysts suggesting a Buy and 2 analysts recommending a Hold. The average analyst price target of $49 implies around 22.6% upside potential to current levels.

Shares of Shell have dropped 9.8% in the past month. According to the TipRanks Smart Score system, Shell scores a 6 out of 10 indicating that the stock is likely to perform in line with market averages.

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