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Will Higher Oil Price Propel Shell's (SHEL) Q1 Earnings?
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Shell plc (SHEL - Free Report) is set to release first-quarter results on May 5. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $2.12 per share.
Let’s delve into the factors that might have influenced the integrated energy behemoth’s results in the March quarter. But it’s worth taking a look at SHEL’s previous-quarter performance first.
Highlights of Q4 Earnings & Surprise History
In the last-reported quarter, Europe’s largest oil company beat the consensus mark on higher commodity prices. SHEL had reported earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) — of $1.65, above the Zacks Consensus Estimate of $1.40.
Shell beat the Zacks Consensus Estimate for earnings thrice in the last four quarters and missed in the other, resulting in an earnings surprise of 1.3%, on average. This is depicted in the graph below:
Last month, Shell released a preliminary report for the January-March period, which 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 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.
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 fluctuations in 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.
Now, let’s dig into some other segment-wise selected items from that release.
Upstream
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.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Shell is likely to beat estimates in the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: SHEL has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.12 per share each. Investors should know that the Zacks Consensus Estimate for the first-quarter bottom line has remained the same in the past seven days.
Zacks Rank: Shell currently carries a Zacks Rank #1, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult this earnings season.
Stocks to Consider
While an earnings beat looks uncertain for SHEL, here are some firms from the energy space that you may want to consider on the basis of our model:
HighPeak Energy, Inc. (HPK - Free Report) has an Earnings ESP of +2.97% and a Zacks Rank #1. The firm is scheduled to release earnings on May 16.
For 2022, HPK has a projected earnings growth rate of 580.3%. Valued at around $2.6 billion, HighPeak Energy has increased around 191.6% in a year.
Calumet Specialty Products Partners, L.P. (CLMT - Free Report) has an Earnings ESP of +31.53% and is Zacks #2 Ranked. The firm is scheduled to release earnings on May 6.
CLMT is valued at around $1.1 billion. For 2022, the partnership has a projected earnings growth rate of 70.3%. Calumet has gained around 142.2% in a year.
Western Midstream Partners, LP (WES - Free Report) has an Earnings ESP of +5.32% and a Zacks Rank #3. The firm is scheduled to release earnings on May 10.
For 2022, WES has a projected earnings growth rate of 20.2%. Valued at around $9.8 billion, Western Midstream has increased around 32.4% in a year.
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Will Higher Oil Price Propel Shell's (SHEL) Q1 Earnings?
Shell plc (SHEL - Free Report) is set to release first-quarter results on May 5. The current Zacks Consensus Estimate for the to-be-reported quarter is a profit of $2.12 per share.
Let’s delve into the factors that might have influenced the integrated energy behemoth’s results in the March quarter. But it’s worth taking a look at SHEL’s previous-quarter performance first.
Highlights of Q4 Earnings & Surprise History
In the last-reported quarter, Europe’s largest oil company beat the consensus mark on higher commodity prices. SHEL had reported earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) — of $1.65, above the Zacks Consensus Estimate of $1.40.
Shell beat the Zacks Consensus Estimate for earnings thrice in the last four quarters and missed in the other, resulting in an earnings surprise of 1.3%, on average. This is depicted in the graph below:
Shell PLC Unsponsored ADR Price and EPS Surprise
Shell PLC Unsponsored ADR price-eps-surprise | Shell PLC Unsponsored ADR Quote
Factors to Consider
Last month, Shell released a preliminary report for the January-March period, which 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 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.
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 fluctuations in 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.
Now, let’s dig into some other segment-wise selected items from that release.
Upstream
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.
What Does Our Model Say?
The proven Zacks model does not conclusively show that Shell is likely to beat estimates in the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: SHEL has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.12 per share each. Investors should know that the Zacks Consensus Estimate for the first-quarter bottom line has remained the same in the past seven days.
Zacks Rank: Shell currently carries a Zacks Rank #1, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult this earnings season.
Stocks to Consider
While an earnings beat looks uncertain for SHEL, here are some firms from the energy space that you may want to consider on the basis of our model:
HighPeak Energy, Inc. (HPK - Free Report) has an Earnings ESP of +2.97% and a Zacks Rank #1. The firm is scheduled to release earnings on May 16.
You can see the complete list of today’s Zacks #1 Rank stocks here.
For 2022, HPK has a projected earnings growth rate of 580.3%. Valued at around $2.6 billion, HighPeak Energy has increased around 191.6% in a year.
Calumet Specialty Products Partners, L.P. (CLMT - Free Report) has an Earnings ESP of +31.53% and is Zacks #2 Ranked. The firm is scheduled to release earnings on May 6.
CLMT is valued at around $1.1 billion. For 2022, the partnership has a projected earnings growth rate of 70.3%. Calumet has gained around 142.2% in a year.
Western Midstream Partners, LP (WES - Free Report) has an Earnings ESP of +5.32% and a Zacks Rank #3. The firm is scheduled to release earnings on May 10.
For 2022, WES has a projected earnings growth rate of 20.2%. Valued at around $9.8 billion, Western Midstream has increased around 32.4% in a year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.