Shell warns that its gas trading business has weakened
The FTSE 100 group said that its trading business would be 'significantly lower' and reduced the top end of its production guidance for the integrated gas division to 940,000 barrels of oil equivalent a day (boe/d) from the 950,000 boe/d previously expected. The lower end of its guidance range was raised to 900,000 boe/d, from 890,000 boe/d.
The outlook for volumes at its liquefied natural gas business also shifted to between 6.4 million and 6.8 million tonnes (mt), from the 6.3 mt to 6.9 mt previously expected.
The downbeat update breaks a streak of positive quarterly numbers, which has also led to the group buying back billions in shares. In May it said it would repurchase another $3.5 billion of its shares after reporting better-than-expected profits of $5.6 billion for the first quarter of the year.
The investment bank RBC Capital cut its net profit forecast to $3.6 billion, from $4.8 billion, for the second quarter. The shares were 64p, or 2.4 per cent, lower at £25.64 in afternoon trading.
Shell is one of the largest traders of gas in Europe and has forecast a rise of 60 per cent in LNG demand by 2040, largely driven by Asia and a shift away from coal as a fuel source.
At its capital markets day in March, Shell said it would grow LNG sales at a compound annual rate of between 4 and 5 per cent by 2030, in addition to an existing target to grow liquefaction capacity by 25 to 30 per cent by the same date.
The group has, however, faced a backlash from some shareholders over its plans to grow its LNG business. In May a special resolution filed by three British local authority pension schemes and the Australasian Centre for Corporate Responsibility calling on Shell to give more information on its LNG business and spending plans and explain how its targets were compatible with its climate goals, won the support of 20.6 per cent of shareholders.
Shell has global operations that range from drilling for oil and gas to retailing petrol. Wael Sawan, who became chief executive at the start of 2023, is attempting to close a valuation gap with its American rivals such as Exxon and Chevron. He has scaled back its investment in green energy and doubled down on fossil fuels.
The group, which is due to release its second-quarter results on July 31, said that overall upstream production was expected to come in at 1.66 million to 1.76 million boe/d for the three months.
Over the weekend Opec+, the group of the biggest oil-producing nations, announced a higher-than-expected increase in output for August of 0.55 million barrels a day. The markets shrugged off the impact of the cartel unwinding its production cuts, however, and Brent crude, the international benchmark, was up $0.82, or 1.2 per cent, to $69.1 in afternoon trading.
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