RDSA Shell Plc

--Shell expects hit from write-downs, asset restructuring and onerous contracts

--Oil major expects quarterly adjusted loss in its upstream operations

--Shell sees upstream production below previous guidance but better integrated gas output

By Adria Calatayud

Royal Dutch Shell PLC said Monday that it expects to book fourth-quarter post-tax charges of between $3.5 billion and $4.5 billion in relation to write-downs, asset restructuring and onerous contracts.

The Anglo-Dutch oil major said the expected charges are related to a partial impairment of its Appomattox asset in the U.S. Gulf of Mexico in its upstream operations, a turnaround in its refinery portfolio, and onerous contracts in its integrated-gas operations.

The company said it expects higher underlying operating expenses due to increased activity in the fourth quarter compared with the third, which are expected to hurt adjusted earnings across its businesses.

Shell said it expects fourth-quarter adjusted earnings for its upstream operations to show a loss in the current price environment. Upstream production for the quarter is forecast to be between 2.28 million and 2.35 million barrels of oil equivalent a day, it said.

At the time of its third-quarter results, Shell said fourth-quarter production would be between 2.3 million and 2.5 million barrels of oil equivalent a day. The company said its updated guidance reflects hurricane impacts in the Gulf of Mexico and the effects of mild weather in northern Europe.

Integrated-gas production for the fourth quarter is expected to be between 900,000 and 940,000 barrels of oil equivalent a day, Shell said. This is better than the company's previous guidance of between 830,000 and 870,000 barrels of oil equivalent a day. However, Shell said the earnings benefit of increased production will be limited.

Liquefied natural gas liquefaction volumes are expected to be between 8.0 million and 8.6 million tons in the fourth quarter, ahead of Shell's previous guidance of between 7.9 million and 8.5 million tons.

The company said fourth-quarter oil-products sales volumes are anticipated to be between 4 million and 5 million barrels a day, while chemicals sales volumes are expected to be between 3.6 million and 3.9 million tons. This is broadly in line with Shell's guidance given at the time of its third-quarter results.

In its oil-products operations, Shell said marketing results are expected to be in line with the fourth quarter of last year and significantly lower compared with the third quarter due to lower volumes. Trading and optimization results are expected to be significantly lower compared with the previous quarter, the company said.

The company said it will provide a strategy update on Feb. 11.

Shell's B shares in London at 0802 GMT were down 4.9% at 1,275.60 pence.

Write to Adria Calatayud at adria.calatayud@dowjones.com

(END) Dow Jones Newswires

December 21, 2020 03:25 ET (08:25 GMT)

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