Shell plc Form 6-K Summary: Q4 2024 Outlook Update
Business Context and Reporting Period
This Form 6-K, filed on January 8, 2025, provides an updated outlook for Shell plc's fourth quarter of 2024. The filing details expectations for production volumes, operating expenses, and earnings across all business segments. Final audited results for the quarter are scheduled for publication on January 30, 2025. All outlook figures exclude identified items unless otherwise noted.
Key Financial Metrics and Segment Outlook
The following table summarizes the Q3 2024 actuals versus the updated Q4 2024 outlook (in billions USD unless stated otherwise):
| Segment | Key Metric | Q3 2024 Actual | Q4 2024 Outlook |
|---|---|---|---|
| Integrated Gas | Production (kboe/d) | 941 | 880 - 920 |
| LNG Liquefaction (MT) | 7.5 | 6.8 - 7.2 | |
| Underlying Opex ($B) | 1.1 | 1.0 - 1.2 | |
| Upstream | Production (kboe/d) | 1,811 | 1,790 - 1,890 |
| Underlying Opex ($B) | 2.1 | 2.2 - 2.8 | |
| Marketing | Sales Volumes (kb/d) | 2,945 | 2,600 - 3,000 |
| Underlying Opex ($B) | 2.7 | 2.4 - 2.8 | |
| Chemicals & Products | Refining Margin ($/bbl) | 5.5 | 5.5 |
| Chemicals Margin ($/tonne) | 164 | 138 | |
| Refinery Utilisation | 81% | 74% - 78% | |
| Renewables & Energy Solutions | Adjusted Earnings ($B) | (0.2) | (0.6) - (0.1) |
| Corporate | Adjusted Earnings ($B) | (0.6) | (0.4) - (0.2) |
| Shell Group | CFFO excluding Working Capital ($B) | 2.7 | (1) - 3 |
Material Changes and Drivers
- Production Declines: Integrated Gas production is expected to decrease due to scheduled maintenance at Pearl GTL in Qatar. LNG volumes are lower due to reduced feedgas and lifting timing.
- Trading Results: Trading and optimisation results are projected to be significantly lower than Q3 2024, driven by the non-cash impact of expiring hedging contracts and seasonality.
- Write-offs: Exploration well write-offs are expected to total approximately $0.7 billion ($0.3 billion in Integrated Gas and $0.4 billion in Upstream).
- Chemicals Loss: The Chemicals sub-segment is expected to report a loss in Q4 2024, with indicative margins declining from $164/tonne in Q3 to $138/tonne.
- Working Capital: Q4 2024 working capital movements are expected to include a ~$1.0 billion payment of German Mineral Oil Taxes and a ~$1.3 billion outflow related to emissions certificates (German BEHG and US Biofuel programmes).
Guidance, Risks, and Contingencies
Net Debt: Net debt is expected to increase by $4 - 6 billion due to new lease liabilities recognized in Q4 2024, including the LNG Canada pipeline liability.
Taxation: The taxation charge includes an annual reassessment of deferred tax assets and one-off tax items. Non-cash post-tax impairments or reversals are expected to range between $1.5 billion and $3.0 billion across segments.
Risks: The filing highlights standard forward-looking risks including price fluctuations in crude oil and natural gas, currency fluctuations, regulatory developments regarding climate change, and geopolitical risks (e.g., Russia-Ukraine war). Management notes that actual results may differ materially from these expectations.
Investor Verification Checklist
- Verify the final Q4 2024 results upon publication on January 30, 2025, to confirm if the outlook ranges were met.
- Monitor the impact of the ~$1.3 billion emissions certificate payments on full-year cash flow from operating activities.
- Review the reconciliation of non-GAAP measures (Adjusted Earnings/EBITDA) to GAAP measures in the final report.
- Assess the magnitude of the Chemicals segment loss and its impact on the overall portfolio margin.
- Confirm the final net debt position after the recognition of the LNG Canada pipeline liability.