What to Expect from Shell’s Fourth Quarter Earnings Report

• Shell expects non-cash post-tax impairments of $2.5 to $4.5 billion, mainly due to macroeconomic factors and portfolio changes.
• Cash flow from operations will be impacted by approximately $900 million related to emissions certificates payments.
• Despite the expected losses, Shell's integrated gas division performed well, with a significant increase in adjusted earnings and EBTDA compared to Q3.

Shell’s fourth-quarter results will include impairment charges of up to $4.5 billion, which would be partly offset by a strong gas trading business, the UK-based supermajor said on Monday.  

Shell expects non-cash post tax impairments – which will be reported as identified items – of between $2.5 billion and $4.5 billion for the fourth quarter, “primarily driven by macro & external developments as well as portfolio choices, including the Singapore Chemicals & Products assets.” 

In addition, cash flow from operations (CFFO) will see around $900 million hit, related to the timing of payments of emissions certificates, said the supermajor, which is reporting Q4 and full-year 2023 earnings on February 1.  

Shell, however, earned a lot from trading and optimization in its integrated gas division, where adjusted earnings and EBTDA are expected to be “significantly higher” for Q4 compared to Q3, due to seasonality and increased optimization opportunities, the company said in an update note on the expected Q4 2023 results. 

Shell expects to post an adjusted earnings loss for Q4 in the chemicals and fuels segment, amid “significantly lower” trading and optimization.  

Following the update, shares in Shell slumped by 1.7% in London and the leader of the FTSE 100 index by market capitalization was the biggest loser on the index in the early morning on Monday. 

Shell, which had booked earnings of $6.2 billion for the third quarter, is the latest supermajor to flag impairment charges for the fourth quarter.

Last week, Chevron said that it would take an up to $4 billion charge in the fourth-quarter results, due to impairments to U.S. upstream assets in California and the Gulf of Mexico.

The other U.S. supermajor, Exxon, will need to write down its California assets by about $2.5 billion as of the fourth quarter of 2023 after it struck a deal with an energy independent to offload these.

“Continuing challenges in the state regulatory environment have impeded progress in restoring operations,” Exxon said in a filing, referring to oil production at its Santa Ynez field in California.   

By Tsvetana Paraskova for Oilprice.com

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