Send me real-time posts from this site at my email
Zacks

All You Need to Know About Shell's (SHEL) Q3 Earnings Update

Shell plc SHEL said its third-quarter profits will bear the brunt of extreme volatility and tumbling refining margins. While extreme market volatility meant that the Integrated Gas division will deliver a lower contribution to earnings, the moderation of refining margins from their spectacular levels earlier in the year affected the Chemicals & Products unit.    

Now, let’s dig into some other segment-wise selected items from Thursday’s release.

Upstream

According to the latest update, Shell’s upstream production fell 13.5% on a year-over-year basis in the third quarter of 2022 at the midpoint of the guidance. The supermajor is estimating its output in the range of 1,750-1,850 MBOE/d compared to 2,081 MBOE/d a year ago and 1,917 MBOE/d in the second quarter of 2022. Tax charges are expected to hurt earnings in the range of $3.4-4 billion. Meanwhile, Shell sees the share of profit of joint ventures and associates to swell by $500-$700 million from storage transfer gains. Segment profit is also likely to include non-cash one-off gains between $800 million and $1 billion.

Integrated Gas

Shell’s LNG liquefaction volumes are expected in the range of 6.9-7.5 million tons, which translates into a deterioration of around 2.6% year over year and 6% sequentially. Shell’s integrated gas production is expected to decrease to the range of 890,000-940,000 barrels of oil equivalent per day (BOE/d) or 915,000 BOE/d at the midpoint. It was 938,000 BOE/d in the third quarter of 2021 and 944,000 BOE/d in the June quarter. Per the company, third-quarter trading and optimization results in its integrated gas unit will be “significantly lower compared to the second quarter 2022” due to seasonality and market volatility.

Marketing

The midpoint of management’s marketing sales volume guidance equates to 2.55 million barrels per day, higher than the 2.515 achieved in the second quarter of 2022. Overall, segment profits are expected to be above second-quarter levels, while indicating that operating expenses will be between $2 and $2.2 billion.

Chemicals & Products

The company fears that a drop in refining profitability is expected to bring down adjusted EBITDA from their second-quarter levels. As projected by Shell, the refining margin should considerably weaken in the third quarter, with the metric plunging 46% sequentially. The decrease would hurt product earnings by $1.2 billion at the midpoint of SHEL’s estimates. Similarly, negative margins in Shell’s chemicals-refining operations could take away $300 million to $600 million from third-quarter earnings, the company said. Shell also forecast refinery utilization of 86-90%, operating expense of 2.7-3.1 billion and chemicals manufacturing plant utilization of 75-79%.

Renewables and Energy Solutions

The adjusted bottom line of this segment is expected to hover between a loss of $300 million and a profit of $300 million.

Q3 Estimates

This Zacks Rank #2 (Buy) company, which consolidated its dual headquarters in London over The Hague and became a single United Kingdom (“UK”) entity earlier this year, is slated to release third-quarter 2022 results on Oct 27. The current Zacks Consensus Estimate for Shell’s to-be-reported quarter is a profit of $3.03 per share.

Other Energy Picks

Apart from Shell, investors interested in the energy sector might look at Cheniere Energy LNG and Valero Energy VLO. Each of the companies has a Zacks Rank of 2.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cheniere Energy: Cheniere Energy is valued at some $42.8 billion. The Zacks Consensus Estimate for LNG’s third-quarter earnings has been revised 75.1% upward over the past 90 days.

Cheniere Energy, headquartered in Houston, TX, beat Q2 earnings estimates by 2.5%. LNG shares have gained around 72.4% in a year.

Valero Energy: VLO beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 33.5%, on average.

Valero Energy is valued at around $46.5 billion. VLO has seen its shares gain around 57.1% in a year.


This Little-Known Semiconductor Stock Could Be Your Portfolio’s Hedge Against Inflation

Everyone uses semiconductors. But only a small number of people know what they are and what they do. If you use a smartphone, computer, microwave, digital camera or refrigerator (and that’s just the tip of the iceberg), you have a need for semiconductors. That’s why their importance can’t be overstated and their disruption in the supply chain has such a global effect. But every cloud has a silver lining. Shockwaves to the international supply chain from the global pandemic have unearthed a tremendous opportunity for investors. And today, Zacks' leading stock strategist is revealing the one semiconductor stock that stands to gain the most in a new FREE report. It's yours at no cost and with no obligation.

>>Yes, I Want to Help Protect My Portfolio During the Recession

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Valero Energy Corporation (VLO): Free Stock Analysis Report
 
Cheniere Energy, Inc. (LNG): Free Stock Analysis Report
 
Shell PLC Unsponsored ADR (SHEL): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue