TIDMSHELL
The following is an update to the third quarter 2022 outlook.
Impacts presented may vary from the actual third quarter 2022
results and are subject to finalisation of those results, which
will be published on October 27, 2022. Unless otherwise indicated,
all outlook statements exclude identified items.
Integrated Gas
Adjusted EBITDA
-- Production is expected to be between 890 and 940 thousand barrels of oil
equivalent per day.
-- LNG liquefaction volumes are expected to be between 6.9 and 7.5 million
tonnes.
-- Trading and optimisation results for Integrated Gas are expected to be
significantly lower compared to the second quarter 2022 as a result of
seasonality and substantial differences between paper and physical
realisation in a volatile and dislocated market.
-- Underlying Opex is expected to be between $1.1 and $1.3 billion.
Adjusted Earnings
-- Pre-tax depreciation is expected to be between $1.3 and $1.7 billion.
-- Taxation charge is expected to be between $1.3 and $1.6 billion.
Upstream
Adjusted EBITDA
-- Production is expected to be between 1,750 and 1,850 thousand barrels of
oil equivalent per day.
-- Underlying Opex is expected to be between $2.5 and $2.9 billion.
-- The share of profit of joint ventures and associates is expected to
include a gain between $0.5 and $0.7 billion relating to storage transfer
effects.
-- Adjusted EBITDA is also expected to include non-cash one-off gains
between $0.8 and $1.0 billion.
Adjusted Earnings
-- Pre-tax depreciation is expected to be between $3.0 and $3.4 billion.
-- Taxation charge is expected to be between $3.4 and $4.0 billion, which
includes a one-off release of non-cash tax provision of approximately
$0.3 billion.
Marketing
Adjusted EBITDA
-- Marketing results are expected to be higher than the second quarter 2022.
-- Underlying Opex is expected to be between $2.0 and $2.2 billion.
-- Sales volumes are expected to be between 2,350 and 2,750 thousand barrels
per day.
Adjusted Earnings
-- Pre-tax depreciation is expected to be between $300 and $500 million.
-- Taxation charge is expected to be between $150 and $350 million.
Chemicals & Products
Adjusted EBITDA
-- The indicative refining margin is $15/bbl, compared to $28/bbl in the
second quarter 2022; the decrease in margin is expected to have a
negative impact of between $1.0 and $1.4 billion on the third quarter
Adjusted EBITDA for Products compared to the second quarter 2022.
-- The indicative chemicals margin is expected to be negative of $(27)/tonne,
compared to a positive $86/tonne in the second quarter 2022; the decrease
in margin is expected to have a negative impact of between $300 and $600
million on the third quarter Adjusted EBITDA of Chemicals compared to the
second quarter 2022.
-- Trading and Optimisation is expected to be in line with the second
quarter 2022.
-- Refinery utilisation is expected to be between 86% and 90%.
-- Chemicals utilisation is expected to between 75% and 79%.
-- Underlying Opex is expected to be between $2.7 and $3.1 billion.
Adjusted Earnings
-- Pre-tax depreciation is expected to be between $650 and $850 million.
-- Taxation charge is expected to be between $100 and $400 million.
Renewables and Energy Solutions
-- Renewables and Energy Solutions Adjusted Earnings are expected to be
between $(300) and $300 million for the third quarter.
Corporate
-- Corporate segment Adjusted Earnings are expected to be a net expense of
$550 to $750 million for the third quarter.
Shell Group
CFFO
-- Tax paid is expected to be between $3.4 and $3.8 billion.
-- As of the end of August, CFFO was impacted by working capital outflows of
around $2.5 billion. Prevailing volatility could lead to additional
outflows in CFFO in September from the combined effect of: price impacts
on inventory, changes in inventory volumes (including gas storage),
margining effects on derivatives and movements in accounts payable and
receivables balances.
Full-year price and margin sensitivities
The Adjusted Earnings and CFFO price and margin sensitivities
are indicative and subject to change. These are in relation to the
full-year results and exclude short-term impacts from working
capital movements, production seasonality, cost-of-sales
adjustments and derivatives. Sensitivity accuracy is subject to
trading and optimisation performance, including short-term
opportunities, depending on market conditions. These sensitivities
are reviewed and updated annually in the fourth quarter.
Adjusted Earnings CFFO
Marker sensitivity $ million $ million
-------------------------- ----------------------------
Integrated Gas
+$10/bbl Brent 1,000 1,000
+$10/bbl Japan Customs-cleared Crude
- 3 months 1,100 1,200
Upstream
+$10/bbl Brent 2,500 3,000
+$1/mmbtu Henry Hub 250 325
+$1/mmbtu EU TTF 150 150
Chemicals & Products
+$1/bbl indicative refining margin 425 --
+$30/tonne indicative chemicals 700 --
margin
Indicative chemicals margin
The indicative chemicals margin is an approximation of Shell's
global chemical margin performance trend (including
equity-accounted associates), calculated using price markers from
third parties' databases. It is based on a simplified feedstock and
product yield profile at a nominal level of plant performance and
optimisation. The actual margins realised by Shell may vary due to
factors including specific local market effects, chemicals plants
maintenance, optimisation, operating decisions and product
demand.
Actual historical indicative margins based on the enclosed
indicative margin formula are available on the Chemicals &
Products page in the Quarterly Data Book.
Q3 2022 Q2 2022 Q1 2022
$(27)/tonne $86/tonne $98/tonne
Actual realised margins are expected to exceed the formula this
quarter due to various optimisation strategies in the current
market environment.
Calculation formula ($/tonne) - note that brackets indicate a
negative sign. For Natural Gas a factor of 48.65mmBTU/tonne and for
Ethane a factor of 17.6bbl/tonne has been assumed.
NWE TTF Natural Gas*(4.0%) + USGC Henry Hub Natural Gas*(12.5%)
+ USGC Mont Belvieu Ethane*(4.0%) + NWE Naphtha*(19.0%) + NWE
Butane*(3.5%) + Singapore Automotive Gasoil 10ppm*(4.0)% +
Singapore Fuel oil 380 cst*(1.5)% + Japan Naphtha*(9.0)% + USGC
VGO_LS*(4.5)% + USGC Gasoline Regular*5.5% + NWE Propylene*6.0% +
NWE Ethylene Oxide*2.5% + NWE Ethylene*5.0% + South East Asia
Propylene*1.5% + South East Asia Polypropylene*3% + China
Styrene*10.5% + China Propylene Oxide*3.0% + China MEG*8.0% + USGC
Ethylene*4.0% + Korea Benzene*(4.0)% + $18.5/tonne
Indicative refining margin
The indicative refining margin is an approximation of Shell's
global gross refining unit margin, calculated using price markers
from third parties' databases. It is based on a simplified crude
and product yield profile at a nominal level of refining
performance. The actual margins realised by Shell may vary due to
factors including specific local market effects, refinery
maintenance, crude diet optimisation, operating decisions and
product demand.
Gross refining unit margin is defined as the hydrocarbon margin
net of purchased/sold utilities, additives and relevant freight
costs, divided by crude and feedstock intake in barrels. It is only
applicable to the impact of market pricing on refining business
performance, excluding trading margin.
Actual historical indicative margins based on the 2021
indicative margin formula are available on the Refining &
Trading page in the Quarterly Data Book.
Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021
$15.03/bbl $28.04/bbl $10.23/bbl $6.55/bbl $5.70/bbl
The formula provided will be reviewed quarterly and typically
updated annually, reflecting any changes in our refining
portfolio.
Calculation formula ($/bbl) - note that brackets indicate a
negative sign
Brent*(29.0%) + MSW*(11.5%) + LLS*(16.0%) + Dubai*(33.5%) +
Urals CIF EU*(7.5%) + NWE Naphtha (RDAM FOB Barge)*9.5% + NWE Mogas
premium unleaded*13.0% + NWE Kero*12.0% + NWE AGO*27% + NWE
Benzene*1% + Sing Fueloil 380 cst*7.5% + USGC Normal Butane*3.5% +
USGC LS No 2 Gasoil*8.0% + USGC Natural Gas*(2.0%) +TTF Natural
Gas*(1%)+ USGC CBOB*14.5% + RINS*(22.0%) + NWE Propylene Platts*1%
-- $0.92/bbl
Consensus
The consensus collection for quarterly Adjusted Earnings,
Adjusted EBITDA is per the new reporting segments and CFFO at a
Shell group level, managed by Vara Research, will be published on
20 October 2022.
Enquiries
Media International: +44 (0) 207 934 5550
Media Americas: +1 832 337 4355
Cautionary Note
The companies in which Shell plc directly and indirectly owns
investments are separate legal entities. In this announcement
"Shell", "Shell Group" and "Group" are sometimes used for
convenience where references are made to Shell plc and its
subsidiaries in general. Likewise, the words "we", "us" and "our"
are also used to refer to Shell plc and its subsidiaries in general
or to those who work for them. These terms are also used where no
useful purpose is served by identifying the particular entity or
entities. "Subsidiaries", "Shell subsidiaries" and "Shell
companies" as used in this announcement refer to entities over
which Shell plc either directly or indirectly has control. Entities
and unincorporated arrangements over which Shell has joint control
are generally referred to as "joint ventures" and "joint
operations", respectively. "Joint ventures" and "joint operations"
are collectively referred to as "joint arrangements". Entities over
which Shell has significant influence but neither control nor joint
control are referred to as "associates". The term "Shell interest"
is used for convenience to indicate the direct and/or indirect
ownership interest held by Shell in an entity or unincorporated
joint arrangement, after exclusion of all third-party interest.
Forward-Looking Statements
This announcement contains forward-looking statements (within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995) concerning the financial condition, results of operations and
businesses of Shell. All statements other than statements of
historical fact are, or may be deemed to be, forward-looking
statements. Forward-looking statements are statements of future
expectations that are based on management's current expectations
and assumptions and involve known and unknown risks and
uncertainties that could cause actual results, performance or
events to differ materially from those expressed or implied in
these statements. Forward-looking statements include, among other
things, statements concerning the potential exposure of Shell to
market risks and statements expressing management's expectations,
beliefs, estimates, forecasts, projections and assumptions. These
forward-looking statements are identified by their use of terms and
phrases such as "aim", "ambition", "anticipate", "believe",
"could", "estimate", "expect", "goals", "intend", "may",
"milestones", "objectives", "outlook", "plan", "probably",
"project", "risks", "schedule", "seek", "should", "target", "will"
and similar terms and phrases. There are a number of factors that
could affect the future operations of Shell and could cause those
results to differ materially from those expressed in the
forward-looking statements included in this announcement ,
including (without limitation): (a) price fluctuations in crude oil
and natural gas; (b) changes in demand for Shell's products; (c)
currency fluctuations; (d) drilling and production results; (e)
reserves estimates; (f) loss of market share and industry
competition; (g) environmental and physical risks; (h) risks
associated with the identification of suitable potential
acquisition properties and targets, and successful negotiation and
completion of such transactions; (i) the risk of doing business in
developing countries and countries subject to international
sanctions; (j) legislative, judicial, fiscal and regulatory
developments including regulatory measures addressing climate
change; (k) economic and financial market conditions in various
countries and regions; (l) political risks, including the risks of
expropriation and renegotiation of the terms of contracts with
governmental entities, delays or advancements in the approval of
projects and delays in the reimbursement for shared costs; (m)
risks associated with the impact of pandemics, such as the COVID-19
(coronavirus) outbreak; and (n) changes in trading conditions. No
assurance is provided that future dividend payments will match or
exceed previous dividend payments. All forward-looking statements
contained in this announcement are expressly qualified in their
entirety by the cautionary statements contained or referred to in
this section. Readers should not place undue reliance on
forward-looking statements. Additional risk factors that may affect
future results are contained in Shell plc's Form 20-F for the year
ended December 31, 2021 (available at www.shell.com/investor and
www.sec.gov). These risk factors also expressly qualify all
forward-looking statements contained in this announcement and
should be considered by the reader. Each forward-looking statement
speaks only as of the date of this announcement, October 6, 2022.
Neither Shell plc nor any of its subsidiaries undertake any
obligation to publicly update or revise any forward-looking
statement as a result of new information, future events or other
information. In light of these risks, results could differ
materially from those stated, implied or inferred from the
forward-looking statements contained in this announcement.
Shell's net carbon footprint
Also, in this announcement we may refer to Shell's "Net Carbon
Footprint" or "Net Carbon Intensity", which include Shell's carbon
emissions from the production of our energy products, our
suppliers' carbon emissions in supplying energy for that production
and our customers' carbon emissions associated with their use of
the energy products we sell. Shell only controls its own emissions.
The use of the term Shell's "Net Carbon Footprint" or "Net Carbon
Intensity" are for convenience only and not intended to suggest
these emissions are those of Shell plc or its subsidiaries.
Shell's net-Zero Emissions Target
Shell's operating plan, outlook and budgets are forecasted for a
ten-year period and are updated every year. They reflect the
current economic environment and what we can reasonably expect to
see over the next ten years. Accordingly, they reflect our Scope 1,
Scope 2 and Net Carbon Footprint (NCF) targets over the next ten
years. However, Shell's operating plans cannot reflect our 2050
net-zero emissions target and 2035 NCF target, as these targets are
currently outside our planning period. In the future, as society
moves towards net-zero emissions, we expect Shell's operating plans
to reflect this movement. However, if society is not net zero in
2050, as of today, there would be significant risk that Shell may
not meet this target.
Forward Looking Non-GAAP measures
This announcement may contain certain forward-looking non-GAAP
measures such as IFRS, including Adjusted Earnings, "Adjusted
EBITDA", Cash flow from operating activities excluding working
capital movements, Cash capital expenditure, Net debt and
Underlying opex.
Adjusted Earnings and Adjusted EBITDA are measures used to
evaluate Shell's performance in the period and over time.
The "Adjusted Earnings" and Adjusted EBITDA are measures which
aim to facilitate a comparative understanding of Shell's financial
performance from period to period by removing the effects of oil
price changes on inventory carrying amounts and removing the
effects of identified items.
Adjusted Earnings is defined as income/(loss) attributable to
shareholders adjusted for the current cost of supplies and
excluding identified items. "Adjusted EBITDA (CCS basis)" is
defined as "Income/(loss) for the period" adjusted for current cost
of supplies; identified items; tax charge/(credit); depreciation,
amortisation and depletion; exploration well write-offs and net
interest expense. All items include the non-controlling interest
component.
Cash flow from operating activities excluding working capital
movements is a measure used by Shell to analyse its operating cash
generation over time excluding the timing effects of changes in
inventories and operating receivables and payables from period to
period. Working capital movements are defined as the sum of the
following items in the Consolidated Statement of Cash Flows: (i)
(increase)/decrease in inventories, (ii) (increase)/decrease in
current receivables, and (iii) increase/(decrease) in current
payables. Cash capital expenditure is the sum of the following
lines from the Consolidated Statement of Cash flows: Capital
expenditure, Investments in joint ventures and associates and
Investments in equity securities. Net debt is defined as the sum of
current and non-current debt, less cash and cash equivalents,
adjusted for the fair value of derivative financial instruments
used to hedge foreign exchange and interest rate risks relating to
debt, and associated collateral balances. Underlying operating
expenses is a measure of Shell's cost management performance and
aimed at facilitating a comparative understanding of performance
from period to period by removing the effects of identified items,
which, either individually or collectively, can cause volatility,
in some cases driven by external factors. Underlying operating
expenses comprises the following items from the Consolidated
statement of Income: production and manufacturing expenses;
selling, distribution and administrative expenses; and research and
development expenses and removes the effects of identified items
such as redundancy and restructuring charges or reversals,
provisions or reversals and others.
We are unable to provide a reconciliation of these
forward-looking Non-GAAP measures to the most comparable GAAP
financial measures because certain information needed to reconcile
those Non-GAAP measures to the most comparable GAAP financial
measures is dependent on future events some of which are outside
the control of Shell, such as oil and gas prices, interest rates
and exchange rates. Moreover, estimating such GAAP measures with
the required precision necessary to provide a meaningful
reconciliation is extremely difficult and could not be accomplished
without unreasonable effort. Non-GAAP measures in respect of future
periods which cannot be reconciled to the most comparable GAAP
financial measure are calculated in a manner which is consistent
with the accounting policies applied in Shell plc's consolidated
financial statements.
The contents of websites referred to in this announcement do not
form part of this announcement.
We may have used certain terms, such as resources, in this
announcement that the United States Securities and Exchange
Commission (SEC) strictly prohibits us from including in our
filings with the SEC. Investors are urged to consider closely the
disclosure in our Form 20-F, File No 1-32575, available on the SEC
website www.sec.gov.
LEI number of Shell plc: 21380068P1DRHMJ8KU70
(END) Dow Jones Newswires
October 06, 2022 02:00 ET (06:00 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
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