Shell updates market on second-quarter outlook

5th Jul 2024 07:03

(Sharecast News) - Oil and gas giant Shell is bracing for a financial impact of up to $2bn (£1.6bn), it revealed on Friday, following its decision to halt construction on a major biofuels plant and sell a refinery in Singapore.

The halted project, a biofuels plant in Rotterdam, Netherlands, was expected to produce 820,000 tonnes of biofuels annually, including sustainable aviation fuel and renewable diesel, starting in 2025.

Suspending it was expected to cost the company up to $1bn, while the sale of the Bukom refinery in Singapore to a joint venture between Glencore and Indonesia's PT Chandra Asri Pacific would incur a loss between $600m and $800m.

In its market update, Shell reported a mixed outlook across its segments.

In the integrated gas segment, production was projected to be between 940,000 and 980,000 barrels of oil equivalent per day (boe/d), with LNG liquefaction volumes forecasted at 6.8 to 7.2 million tonnes.

The segment's underlying operating expenses are estimated between $1bn and $1.2bn, while pre-tax depreciation is anticipated to range from $1.2bn to $1.6bn.

Trading results for the segment were expected to be consistent with the prior year, but lower than the first quarter due to seasonal variations.

Upstream production was expected to fall between 1.72 million and 1.82 million boe/d.

Operating expenses there were projected at $2.1bn to $2.7bn, with pre-tax depreciation estimated between $2.5bn and $2.9bn.

Shell said it anticipated tax charges for the segment to range from $1.8bn to $2.6bn.

The marketing segment was forecast to maintain sales volumes between 2,700 and 3,100 thousand barrels per day, with steady operating expenses and pre-tax depreciation.

Similarly, the chemicals and products segment was expected to see indicative refining margins at $8 per barrel and chemicals margins at $155 per tonne, with refinery utilisation between 91% and 95%.

Shell also highlighted its renewable and energy solutions segment, projecting adjusted earnings between -$0.5bn and $0.1bn.

The corporate segment anticipates adjusted earnings from -$0.7bn to -$0.5bn.

Overall, the group expected total tax payments to range from $3.1bn to $3.9bn, with significant uncertainties in derivative movements and working capital, projected between -$2bn and $2bn.

Non-cash post-tax impairments, primarily from the Singapore chemicals and products assets and the Rotterdam HEFA project, were expected to total $1.5bn to $2bn.

Shell's final second-quarter results were set to be announced on 1 August, pending any last-minute adjustments.

At 0850 BST, shares in Shell were down 0.1% at 2,897p.

Reporting by Josh White for Sharecast.com.