SHEL

Shell PLC on Thursday reported a 54% rise in net profit for the fourth quarter compared with the earlier quarter, which it attributed to higher liquefied natural gas trading and optimization results, favorable deferred tax movements and partly offset by lower realized oil and gas prices, and higher operating expenses. Here's what the energy giant had to say:

On integrated gas:

"Segment earnings, compared with the third quarter 2022, reflected the net effect of higher contributions from trading and optimization and realized prices (increase of $2,855 million), and favorable deferred tax movements (increase of $516 million), partly offset by lower volumes (decrease of $363 million) mainly reflecting longer than expected maintenance at Prelude and operational issues at QGC."

"The trading and optimization contributions were driven by seasonality combined with capturing optimization opportunities generated through the scale and scope of our LNG trading portfolio."

"Fourth quarter 2022 segment earnings also included charges of $708 million due to the fair value accounting of commodity derivatives. As part of Shell's normal business, commodity derivative hedge contracts are entered into for mitigation of economic exposures on future purchases and sales."

"As these commodity derivatives are measured at fair value, this creates an accounting mismatch over periods. These charges are part of identified items and compare with the third quarter 2022 which included gains of $3,419 million due to the fair value accounting of commodity derivatives."

On upstream:

"Segment earnings, compared with the third quarter 2022, were mainly driven by lower oil and gas prices (decrease of $1,849 million) and the comparative adverse impacts of the one-off non-cash provision release (decrease of $503 million) and storage transfer effects, included in the share of profit of joint ventures and associates (decrease of $609 million), in the third quarter."

"Fourth quarter 2022 segment earnings also included charges of $1,385 million relating to the EU solidarity contribution and $441 million relating to the UK Energy Profits Levy, partly offset by gains of $304 million due to the fair value accounting of commodity derivatives."

"These gains and losses are part of identified items, and compare with the third quarter 2022 which included a gain of $312 million due to the impact of the discount rate change on provisions and charges of $361 million relating to the UK Energy Profits Levy and an impairment charge of $303 million."

On marketing:

"Segment earnings, compared with the third quarter 2022, reflected lower marketing margins (decrease of $201 million) mainly driven by seasonal impacts in Mobility, and higher operating expenses (increase of $177 million)."

"Fourth quarter 2022 segment earnings also included impairment charges of $85 million. These charges are part of identified items."

On chemicals and products:

"Segment earnings, compared with the third quarter 2022, reflected higher operating expenses (increase of $213 million), and higher depreciation charges (increase of $101 million), with both operating expenses and depreciation including the start-up of operations at Shell Polymers Monaca. These increases were partly offset by favorable deferred tax movements (increase of $230 million). Margins were in line with the third quarter 2022, with higher Refining margins offset by lower contributions from trading and optimization."

"Fourth quarter 2022 segment earnings also included losses of $214 million due to the fair value accounting of commodity derivatives, legal provisions of $86 million, impairment charges of $84 million and tax charges relating to the EU solidarity contribution of $74 million. These charges are part of identified items, and compare with the third quarter 2022 which included gains of $226 million due to the fair value accounting of commodity derivatives."

On renewables and energy solutions:

"Segment earnings, compared with the third quarter 2022, reflected higher trading and optimization results mainly driven by the European market, partly offset by the American market as significant price volatility continued. The fourth quarter 2022 also included higher operating expenses."

"Fourth quarter 2022 segment earnings also included net gains of $4,748 million due to the fair value accounting of commodity derivatives, and impairment charges of $361 million mainly in Europe. As part of Shell's normal business, commodity derivative hedge contracts are entered into for mitigation of economic exposures on future purchases, sales and inventory."

"As these commodity derivatives are measured at fair value, this creates an accounting mismatch over periods. These net gains are part of identified items and compare with the third quarter 2022 which included net losses of $4,414 million due to the fair value accounting of commodity derivatives."

On 2023 outlook:

"Integrated gas production is expected to be approximately 910-970 thousand boe/d. LNG liquefaction volumes are expected to be approximately 6.6-7.2 million tonnes."

"Upstream production is expected to be approximately 1,750-1,950 thousand boe/d."

"Marketing sales volumes are expected to be approximately 2,150-2,650 thousand b/d."

"Refinery utilization is expected to be approximately 87%-95%. Chemicals manufacturing plant utilization is expected to be approximately 68%-76%. The utilization ranges presented use the revised methodology."

"Corporate adjusted earnings are expected to be a net expense of approximately $400-$600 million in the first quarter 2023 and a net expense of approximately $1,700- $2,300 million for the full year 2023. This excludes the impact of currency exchange rate effects."

"Cash capital expenditure is expected to be within the $23-27 billion range for the full year."

Write to Ian Walker at ian.walker@wsj.com

(END) Dow Jones Newswires

February 02, 2023 03:10 ET (08:10 GMT)

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