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Shell (RDS.A) Braces for Hurricane-Hit Q3 Amid Soaring Prices
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Royal Dutch Shell plc expects a negative impact to its third-quarter earnings and cash flows following disruptions in U.S. Gulf of Mexico production after Hurricane Ida swept through the region. The company lost about $400 million in income when the storm forced it to shut down several Gulf facilities for days and weeks. On a positive note, the European supermajor expects the prevailing strong commodity price environment to significantly boost its ‘Integrated Gas’ results.
After suffering heavy losses in the initial phase of the coronavirus outbreak, especially in the second quarter of 2020, when the Oil/Energy sector was devastated by the pandemic-induced demand destruction and price plunge, some of the world’s biggest oil companies like Shell, ExxonMobil (XOM - Free Report) , Chevron (CVX - Free Report) and BP plc (BP - Free Report) have now returned to profit. Their earnings and cash flows have been steadily improving on the back of higher commodity realizations and a recovery in consumption. As a matter of fact, U.S. oil hit a nearly seven-year high settlement of $78.93 on Tuesday and natural gas is hovering around levels not seen since 2008.
Shell has also benefited from this supportive macro backdrop. Rising on its steadily improving earnings and cash flows, the company has announced the launch of a $2 billion stock repurchase program and has raised its payout thrice since slashing it by two-thirds last year.
Shell released a preliminary report for the July-September period wherein the Anglo-Dutch biggie informed that the performance of the firm’s trading division, which was instrumental in helping the supermajor partly cushion the impact of the coronavirus-induced oil price slump, is likely to be sequentially higher for the Integrated Gas division and “similar” to the Oil Products business.
Now, let’s dig into some other segment-wise selected items from yesterday’s release.
Upstream
According to the latest update, Shell’s upstream production fell by 6.4% on a year-over-year basis in the third quarter of 2021 at the midpoint of the guidance. Taking into account the storm-related outage of 90 oil-equivalent per day (MBOE/d), the supermajor is estimating its output in the range of 2,025 to 2,100 MBOE/d compared to 2,203 MBOE/d a year ago. Tax charges are expected to hurt earnings in the range of $1.2-1.7 billion.
Integrated Gas
Shell’s LNG liquefaction volumes are expected in the range of 7 to 7.5 million tons, which translates into a decline of around 7.1%. The decrease has been blamed on feedgas constraints and additional maintenance activities. However, Shell’s integrated gas production is expected to increase on a year-over-year basis and to the range of 890,000 to 950,000 barrels of oil-equivalent per day (BOE/d). It was 844,000 BOE/d in the third quarter of 2020.
Oil Products
The company’s oil product sales are expected to increase to the range of 4.3 to 5.3 million barrels per day. Refinery utilization is estimated between 70% and 74%, higher than the year-ago period’s 65%. Meanwhile, marketing margins are expected to be higher sequentially.
Chemicals
Chemical sales may go down to the range of 3.4 to 3.7 million tons and margins are likely to decrease from the second quarter. Manufacturing plant availability is down between 74% and 78% (compared to 80% in the corresponding period of 2020).
About Shell
Royal Dutch Shell is one of the primary oil supermajors — a group of U.S. and Europe-based big energy multinationals with operations that span almost every corner of the globe. The Zacks Rank #1 (Strong Buy) company, whose shares are up 34.7% in the year-to-date period, is fully integrated, meaning it participates in every aspect related to energy — from oil production, to refining and marketing.
It is set to be the first big oil company to release third-quarter 2021 results on Oct 28. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $1.40 per share.
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Shell (RDS.A) Braces for Hurricane-Hit Q3 Amid Soaring Prices
Royal Dutch Shell plc expects a negative impact to its third-quarter earnings and cash flows following disruptions in U.S. Gulf of Mexico production after Hurricane Ida swept through the region. The company lost about $400 million in income when the storm forced it to shut down several Gulf facilities for days and weeks. On a positive note, the European supermajor expects the prevailing strong commodity price environment to significantly boost its ‘Integrated Gas’ results.
After suffering heavy losses in the initial phase of the coronavirus outbreak, especially in the second quarter of 2020, when the Oil/Energy sector was devastated by the pandemic-induced demand destruction and price plunge, some of the world’s biggest oil companies like Shell, ExxonMobil (XOM - Free Report) , Chevron (CVX - Free Report) and BP plc (BP - Free Report) have now returned to profit. Their earnings and cash flows have been steadily improving on the back of higher commodity realizations and a recovery in consumption. As a matter of fact, U.S. oil hit a nearly seven-year high settlement of $78.93 on Tuesday and natural gas is hovering around levels not seen since 2008.
Shell has also benefited from this supportive macro backdrop. Rising on its steadily improving earnings and cash flows, the company has announced the launch of a $2 billion stock repurchase program and has raised its payout thrice since slashing it by two-thirds last year.
Shell released a preliminary report for the July-September period wherein the Anglo-Dutch biggie informed that the performance of the firm’s trading division, which was instrumental in helping the supermajor partly cushion the impact of the coronavirus-induced oil price slump, is likely to be sequentially higher for the Integrated Gas division and “similar” to the Oil Products business.
Now, let’s dig into some other segment-wise selected items from yesterday’s release.
Upstream
According to the latest update, Shell’s upstream production fell by 6.4% on a year-over-year basis in the third quarter of 2021 at the midpoint of the guidance. Taking into account the storm-related outage of 90 oil-equivalent per day (MBOE/d), the supermajor is estimating its output in the range of 2,025 to 2,100 MBOE/d compared to 2,203 MBOE/d a year ago. Tax charges are expected to hurt earnings in the range of $1.2-1.7 billion.
Integrated Gas
Shell’s LNG liquefaction volumes are expected in the range of 7 to 7.5 million tons, which translates into a decline of around 7.1%. The decrease has been blamed on feedgas constraints and additional maintenance activities. However, Shell’s integrated gas production is expected to increase on a year-over-year basis and to the range of 890,000 to 950,000 barrels of oil-equivalent per day (BOE/d). It was 844,000 BOE/d in the third quarter of 2020.
Oil Products
The company’s oil product sales are expected to increase to the range of 4.3 to 5.3 million barrels per day. Refinery utilization is estimated between 70% and 74%, higher than the year-ago period’s 65%. Meanwhile, marketing margins are expected to be higher sequentially.
Chemicals
Chemical sales may go down to the range of 3.4 to 3.7 million tons and margins are likely to decrease from the second quarter. Manufacturing plant availability is down between 74% and 78% (compared to 80% in the corresponding period of 2020).
About Shell
Royal Dutch Shell is one of the primary oil supermajors — a group of U.S. and Europe-based big energy multinationals with operations that span almost every corner of the globe. The Zacks Rank #1 (Strong Buy) company, whose shares are up 34.7% in the year-to-date period, is fully integrated, meaning it participates in every aspect related to energy — from oil production, to refining and marketing.
You can see the complete list of today’s Zacks #1 Rank stocks here.
It is set to be the first big oil company to release third-quarter 2021 results on Oct 28. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $1.40 per share.