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Shell’s Financial Rollercoaster: Big Bucks in Gas, Oopsies in Chemicals

Posted by John Donovan 8 Jan 24

In a stunning display of financial gymnastics, Shell has managed to pull off a spectacular feat: raking in the dough from gas trading while simultaneously flagging a modest $2.5 billion to $4.5 billion in impairment costs.

The FTSE 100 energy behemoth, in a Monday announcement that must have had its accountants in a tizzy, warned that it’s expecting to declare these little oopsies in charges. Apparently, these are mostly thanks to its Singapore-based refining and chemical hub having a bit of an off day.

But fear not, shareholders! Shell’s gas division is strutting its stuff, forecasting up to 920,000 barrels of oil equivalent per day, and a dazzling 7.3 million tonnes of liquefied natural gas. It seems seasonal shifts and ‘optimisation opportunities’ (corporate-speak for ‘finding clever ways to make more money’) are working wonders.

In what might be a scene from a corporate yard sale, Shell is reportedly looking to offload some of its assets in Singapore, including an ethylene plant and a refinery churning out a mere 237,000 barrels per day. This is all part of a ‘wider strategic review’ launched last year, because why keep old toys when you can get new ones?

According to Reuters, potential buyers are lining up like kids at a candy store, with names like Eversun Holdings, Befar Group, China National Offshore Oil Corporation, and Vitol. Shell, in the spirit of an auctioneer, has asked for formal bids by the end of February, aiming to seal the deal later this year.

But it’s not all sunshine and rainbows. Shell’s chemicals and products segment is expected to make an adjusted earnings loss in the fourth quarter. It seems trading oil products and chemicals isn’t quite the cash cow it used to be.

Nevertheless, Shell still enjoyed a pretty decent 2023, riding the wave of high oil and gas prices courtesy of Russia’s invasion of Ukraine and OPEC+ production cuts. For the opening nine months, Shell flaunted adjusted earnings of $21 billion, though this was a tad lower than last year’s record profits when oil prices were playing hopscotch above $100.

Victoria Scholar, head of investment at Interactive Investor, chimed in with a reality check. She suggests that solid US output and a weak demand outlook ‘could keep a lid’ on oil prices this year. But hey, there’s always hope with OPEC+ supply cuts and China’s economy potentially perking up.

Despite the ups and downs, Shell’s gas trading division has been a bright star, especially with the increased volatility in fuel prices post-Ukraine invasion. And let’s not forget the chemicals unit, playing second fiddle but still expected to break even compared to last year.

RBC Europe Ltd. analyst Biraj Borkhataria summed it up nicely: “Overall, we see the statement as neutral given a reasonable operational result.” Translation: Shell’s doing okay, but it’s not exactly fireworks.

So there you have it, folks: Shell’s financial report card – acing it in gas, but could do better in chemicals. Stay tuned for the next episode in the thrilling saga of Shell’s financial rollercoaster!

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