Shell plc forecasts US$42/bbl indicative refining margin for Q3
Shell guides Integrated Gas production at 740,000 to 780,000 boe/d and expects lower Marketing adjusted earnings.
Ines Halvorsen
Oct. 7 brought a US$42-a-barrel indicative refining margin outlook from Shell plc LONSHEL NYSESHEL for the third quarter, up from US$24 a barrel in the second, according to its update note. The US$18-a-barrel increase points to stronger refining economics ahead of Shell's Oct. 29 results, although the indicator is not a profit forecast.
Shell's New York shares closed at US$97.62 on Oct. 6, up 1.14 per cent at 4 p.m. EDT, according to its NYSESHEL quote page. That close preceded the new outlook. The Oct. 7 note puts second-quarter adjusted earnings at US$9.8 billion but gives no group adjusted earnings range for the third quarter.
Shell expects Marketing adjusted earnings to be lower than in the second quarter. Its Oct. 7 update puts third-quarter refinery utilisation at 93 to 97 per cent, while low Rhine water levels affect its Rheinland refinery.
Integrated Gas production is forecast at 740,000 to 780,000 barrels of oil equivalent per day, against 631,000 in the second quarter. The earlier third-quarter range was 570,000 to 630,000 barrels of oil equivalent per day, but Shell said that guide excluded volumes from both ARC and Qatar. The updated range includes the acquisition, without isolating ARC's contribution to the increase.
The Integrated Gas outlook includes production from ARC Resources Ltd., which Shell acquired on Sept. 2, according to its completion notice. Shell paid US$3.3 billion in cash and issued US$10.6 billion in new shares. The acquired Canadian assets added about 370,000 barrels of oil equivalent a day across liquids and gas at closing, Shell said.
The purchase carried an enterprise value of about US$16.5 billion, including about US$2.5 billion of net debt and leases. Shell said net debt at the end of the third quarter will reflect the cash purchase price, debt assumed and higher variable components of long-term shipping leases.
Read more: Ithaca Energy plc agrees to buy Suncor's offshore Canada stakes for US$860M (Oct. 5)
Shell forecasts LNG liquefaction volumes of 7.2 million to 7.6 million tonnes, below the second quarter's 7.7 million tonnes. Its upstream output range of 1.735 million to 1.835 million barrels of oil equivalent per day straddles the previous quarter's 1.824 million. Marketing sales are guided at 2.55 million to 2.65 million barrels a day, compared with 2.57 million in the second quarter.
“Marketing adjusted earnings are expected to be lower than Q2'26.” Shell said in its Oct. 7 update.
Low Rhine Water Levels Affect Refinery Use
Second-quarter refinery utilisation was 102 per cent, above the 93 to 97 per cent range Shell now forecasts for the third quarter. The Oct. 7 note locates the water-related constraint at the Rheinland refinery; it gives no Chemicals and Products segment profit forecast.
The Oct. 7 guidance puts the indicative chemicals margin at US$208 a tonne, down from US$270 in the second quarter. Shell forecasts a Chemicals and Products adjusted tax charge of US$1.0 billion to US$1.5 billion, compared with US$0.6 billion in the previous quarter. It also expects about US$300 million in third-quarter upstream exploration well write-offs.
At the group level, Shell's Oct. 7 note expects cash flow from operations excluding working capital to include an approximately US$2.5 billion outflow tied to the timing of German emissions certificate payments. The note says those payments were historically made in the fourth quarter; it does not give a net earnings effect for the change in timing.
Shell expects its company-compiled analyst consensus to be published on Oct. 21. Its third-quarter results are scheduled for Oct. 29, when the margin, volume and cost outlooks can be checked against reported earnings.
