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Shell (SHEL) Flags Possible $5B Q1 Hit From Russia Business
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Shell plc (SHEL - Free Report) said it would take a $4-5 billion hit in the first quarter of this year after ceasing operations in Russia following Moscow’s invasion of Ukraine. The company released a preliminary report for the January-March period wherein the London-based energy biggie informed that apart from the cost of exit, the charges include other associated effects like loss of value on assets, non-payment of obligations and other credit losses.
Seeking to distance itself from the country, the European energy major stated last month that it is withdrawing from the Russian oil and gas industry in a phased manner and is instantly discontinuing all spot purchases of Russian crude. Shell also declared that it would not renew any Russian term contracts and close its service stations, aviation fuels and lubricants operations in the country. Before that, Shell decided to exit its joint ventures with the Russian majority state-owned energy giant, Gazprom, and related entities, including its 27.5% interest in the Sakhalin-II liquefied natural gas facility, and its 50% stake in the Salym Petroleum Development and the Gydan energy venture.
Shell, however, maintained that the charges, which were previously thought to reach some $3.4 billion, won’t impact adjusted earnings. The company also warned about adverse working capital movements to the tune of $7 billion due to highly fluctuating oil and gas prices. On a positive note, the company expects surging commodity realizations to boost its first-quarter trading results, while its LNG unit is also set to benefit. In a first, Shell will separate its renewable energy business from the integrated gas segment, when it reports next month.
Now, let’s dig into some other segment-wise selected items from Thursday’s release.
Upstream
According to the latest update, Shell’s upstream production fell by 19.8% on a year-over-year basis in the first quarter of 2022 at the midpoint of the guidance. The supermajor is estimating its output in the range of 1,900 to 2,050 MBOE/d compared to 2,462 MBOE/d a year ago and 2,161 MBOE/d in the last quarter of 2021. Tax charges are expected to hurt earnings in the range of $2.8-3.3 billion.
Integrated Gas
Shell’s LNG liquefaction volumes are expected in the range of 7.7 to 8.3 million tons, which translates into a decline of around 2% year over year but a slight increase of 0.8% sequentially. Shell’s integrated gas production is also expected to decrease to the range of 860,000 to 910,000 barrels of oil equivalent per day (BOE/d), or 885,000 BOE/d at the midpoint. It was 967,000 BOE/d in the first quarter of 2021 and 927,000 BOE/d in the December quarter. The decreases have been blamed on scheduled maintenance, primarily in Qatar.
Oil Products
The midpoint of management’s oil product sales guidance equates to 4.3 million barrels per day, up from 4.164 in the corresponding period of 2021 but lower than the 4.451 achieved in the fourth quarter of 2021. Refinery utilization is estimated between 70% and 74%, against the year-ago quarter’s 72% and the previous quarter’s 68%. While trading results significantly improved in the March quarter, marketing numbers should be flat with the fourth quarter.
Chemicals
Chemical sales may be in the range of 3.1 to 3.6 million tons, while margins are likely to remain largely unchanged from the fourth quarter with higher feedstock costs being offset by an uptick in utilization. Manufacturing plant availability is down between 78% and 82% (compared to 79% in the corresponding period of 2021 and 75% in the October-December period). Overall, the segment is expected to report earnings in line with the fourth quarter.
Q1 Estimates
The Zacks Rank #2 (Buy) company, which recently consolidated its dual headquarters in London over The Hague and became a single United Kingdom (“UK”) entity, is slated to release first-quarter 2022 results on May 5. The current Zacks Consensus Estimate for Shell’s to-be-reported quarter is a profit of $1.85 per share.
Other Energy Picks
Apart from Shell, investors interested in the energy sector might look at Devon Energy (DVN - Free Report) , Canadian Natural Resources (CNQ - Free Report) and ConocoPhillips (COP - Free Report) . Each of the companies sports a Zacks Rank of 1.
Devon Energy: Devon Energy is valued at some $38.8 billion. The Zacks Consensus Estimate for DVN’s 2022 earnings has been revised 16.2% upward over the past 60 days.
Devon Energy, headquartered in Oklahoma City, OK, delivered a 14.9% beat in Q4. DVN shares have gained around 191.7% in a year.
Canadian Natural Resources: CNQ beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 18.7%, on average.
Canadian Natural is valued at around $72.5 billion. CNQ has seen its shares gain around 110.9% in a year.
ConocoPhillips: ConocoPhillips is valued at some $126.4 billion. The Zacks Consensus Estimate for COP’s 2022 earnings has been revised 11% upward over the past 60 days.
ConocoPhillips, headquartered in Houston, TX, has a trailing four-quarter earnings surprise of roughly 12.6%, on average. COP shares have gained around 101.6% in a year.
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Shell (SHEL) Flags Possible $5B Q1 Hit From Russia Business
Shell plc (SHEL - Free Report) said it would take a $4-5 billion hit in the first quarter of this year after ceasing operations in Russia following Moscow’s invasion of Ukraine. The company released a preliminary report for the January-March period wherein the London-based energy biggie informed that apart from the cost of exit, the charges include other associated effects like loss of value on assets, non-payment of obligations and other credit losses.
Seeking to distance itself from the country, the European energy major stated last month that it is withdrawing from the Russian oil and gas industry in a phased manner and is instantly discontinuing all spot purchases of Russian crude. Shell also declared that it would not renew any Russian term contracts and close its service stations, aviation fuels and lubricants operations in the country. Before that, Shell decided to exit its joint ventures with the Russian majority state-owned energy giant, Gazprom, and related entities, including its 27.5% interest in the Sakhalin-II liquefied natural gas facility, and its 50% stake in the Salym Petroleum Development and the Gydan energy venture.
Shell, however, maintained that the charges, which were previously thought to reach some $3.4 billion, won’t impact adjusted earnings. The company also warned about adverse working capital movements to the tune of $7 billion due to highly fluctuating oil and gas prices. On a positive note, the company expects surging commodity realizations to boost its first-quarter trading results, while its LNG unit is also set to benefit. In a first, Shell will separate its renewable energy business from the integrated gas segment, when it reports next month.
Now, let’s dig into some other segment-wise selected items from Thursday’s release.
Upstream
According to the latest update, Shell’s upstream production fell by 19.8% on a year-over-year basis in the first quarter of 2022 at the midpoint of the guidance. The supermajor is estimating its output in the range of 1,900 to 2,050 MBOE/d compared to 2,462 MBOE/d a year ago and 2,161 MBOE/d in the last quarter of 2021. Tax charges are expected to hurt earnings in the range of $2.8-3.3 billion.
Integrated Gas
Shell’s LNG liquefaction volumes are expected in the range of 7.7 to 8.3 million tons, which translates into a decline of around 2% year over year but a slight increase of 0.8% sequentially. Shell’s integrated gas production is also expected to decrease to the range of 860,000 to 910,000 barrels of oil equivalent per day (BOE/d), or 885,000 BOE/d at the midpoint. It was 967,000 BOE/d in the first quarter of 2021 and 927,000 BOE/d in the December quarter. The decreases have been blamed on scheduled maintenance, primarily in Qatar.
Oil Products
The midpoint of management’s oil product sales guidance equates to 4.3 million barrels per day, up from 4.164 in the corresponding period of 2021 but lower than the 4.451 achieved in the fourth quarter of 2021. Refinery utilization is estimated between 70% and 74%, against the year-ago quarter’s 72% and the previous quarter’s 68%. While trading results significantly improved in the March quarter, marketing numbers should be flat with the fourth quarter.
Chemicals
Chemical sales may be in the range of 3.1 to 3.6 million tons, while margins are likely to remain largely unchanged from the fourth quarter with higher feedstock costs being offset by an uptick in utilization. Manufacturing plant availability is down between 78% and 82% (compared to 79% in the corresponding period of 2021 and 75% in the October-December period). Overall, the segment is expected to report earnings in line with the fourth quarter.
Q1 Estimates
The Zacks Rank #2 (Buy) company, which recently consolidated its dual headquarters in London over The Hague and became a single United Kingdom (“UK”) entity, is slated to release first-quarter 2022 results on May 5. The current Zacks Consensus Estimate for Shell’s to-be-reported quarter is a profit of $1.85 per share.
Other Energy Picks
Apart from Shell, investors interested in the energy sector might look at Devon Energy (DVN - Free Report) , Canadian Natural Resources (CNQ - Free Report) and ConocoPhillips (COP - Free Report) . Each of the companies sports a Zacks Rank of 1.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Devon Energy: Devon Energy is valued at some $38.8 billion. The Zacks Consensus Estimate for DVN’s 2022 earnings has been revised 16.2% upward over the past 60 days.
Devon Energy, headquartered in Oklahoma City, OK, delivered a 14.9% beat in Q4. DVN shares have gained around 191.7% in a year.
Canadian Natural Resources: CNQ beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 18.7%, on average.
Canadian Natural is valued at around $72.5 billion. CNQ has seen its shares gain around 110.9% in a year.
ConocoPhillips: ConocoPhillips is valued at some $126.4 billion. The Zacks Consensus Estimate for COP’s 2022 earnings has been revised 11% upward over the past 60 days.
ConocoPhillips, headquartered in Houston, TX, has a trailing four-quarter earnings surprise of roughly 12.6%, on average. COP shares have gained around 101.6% in a year.