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LNG Trading Set To Boost Shell’s Q4 Earnings

Trading and optimization at Shell’s integrated gas and LNG division is expected to have been significantly higher in the fourth quarter of 2022 compared to the third quarter, despite a decline in production volumes, the UK-based supermajor said on Friday.   

Shell, scheduled to report Q4 and full-year 2022 earnings on February 2, expects LNG liquefaction volumes to be lower than in Q3, due to a longer-than-expected outage at the Prelude LNG platform offshore Australia, the company said in an update note ahead of the release of the Q4 figures.

For the third quarter of 2022, Shell’s adjusted earnings below the record Q2 levels mainly reflected lower trading and optimization results in addition to lower volumes, including the impact of maintenance and the strike at the Prelude LNG in Australia. The trading and optimization results in gas were “impacted by seasonality and supply constraints, coupled with substantial differences between paper and physical realisation in a volatile and dislocated market,” Shell said in October referring to the Q3 performance.

Shell’s LNG trading division reported a loss of nearly $1 billion for Q3. The loss was attributed to serious whiplash after the company’s LNG traders were caught flat-footed by the surge in natural gas prices following Russia’s gas supply cuts to Europe.

Nevertheless, the supermajor said in October that it intends to lift its dividend and launched a new share buyback program after reporting its second-highest quarterly earnings for Q3, second only to the record profit for the previous quarter.

In the update note for Q4 expectations, Shell said today that trading in the chemicals and products division is expected “to be significantly lower than Q3’22.”   

The recently adopted new taxes on energy firms in the EU and the UK are expected to impact the Q4 earnings by around $2 billion, Shell said.

“These impacts will be reported as identified items and therefore will not impact Q4’22 Adjusted Earnings and will have limited cash impact in Q4’22 given the expected timing of payments,” Shell said.  

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By Tsvetana Paraskova for Oilprice.com

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