Shell Expects Higher LNG Output But Flags Continued Refining Weakness — Update

By Christian Moess Laursen

Shell said it expects to report that liquefied natural gas production rose in the third quarter, and that quarterly gas trading was in line with the second quarter's, potentially offsetting continued refining margin weakness.

Europe's top energy company said Monday that it expects its trading result in its core integrated gas unit to be in line with the second quarter's, when the division contributed $2.675 billion in adjusted earnings.

Shell will likely have had to rely on strong gas trading to drive third-quarter earnings as weak oil prices and refining margins are expected to drag results across the European energy sector, according to analysts.

On the flip side, European gas prices rose around 14% through the quarter ended Sept. 30 amid uncertainty around supplies into Europe, Barclays analysts said in a recent note. This will likely offset some of the hits on earnings from lower oil prices and refining margins.

Barclays forecasts earnings to have declined 15% on average for Shell and its European oil-and-gas peers in the third quarter.

Shell, the world's largest trader of liquefied natural gas, lifted its production guidance for the period to between 7.3 million and 7.7 million metric tons from a previous range of 6.8 million-7.4 million tons. It produced 6.9 million tons on LNG in the second quarter.

It also raised its upstream output guidance, as it now expects to report between 1.74 million and 1.84 million barrels of oil equivalent a day, up from its previous outlook of 1.58 million-1.78 million daily barrels. In the second quarter, it produced 1.78 million daily barrels.

However, earnings from the downstream business are expected to have fallen once again as weak refining margins drag the chemicals result. Shell said Monday that its indicative refining margins fell to $5.5 a barrel in the third quarter compared with $7.7 a barrel in the second.

Write to Christian Moess Laursen at christian.moess@wsj.com

(END) Dow Jones Newswires

October 07, 2024 03:00 ET (07:00 GMT)

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