Shell plc Form 6-K Summary: Q3 2023 Outlook
Business Context and Reporting Period
This Form 6-K, filed on October 6, 2023, provides an updated outlook for Shell plc's third quarter of 2023. The filing details management's current expectations for operational volumes, margins, and financial performance across Integrated Gas, Upstream, Marketing, Chemicals & Products, and Renewables segments. Final Q3 2023 results are scheduled for publication on November 2, 2023. All outlook figures exclude identified items unless otherwise noted.
Key Financial Metrics and Operational Outlook
The following table summarizes the Q3 2023 outlook ranges (in billions USD unless specified) compared to Q2 2023 actuals where available:
| Segment / Metric | Q2 2023 Actual | Q3 2023 Outlook |
|---|---|---|
| Integrated Gas | ||
| Production (kboe/d) | 985 | 880 - 920 |
| LNG Liquefaction (MT) | 7.2 | 6.6 - 7.0 |
| Underlying Opex ($B) | 1.2 | 1.1 - 1.3 |
| Upstream | ||
| Production (kboe/d) | 1,701 | 1,700 - 1,800 |
| Underlying Opex ($B) | 2.3 | 2.1 - 2.6 |
| Marketing | ||
| Sales Volumes (kb/d) | 2,607 | 2,450 - 2,850 |
| Underlying Opex ($B) | 2.3 | 2.1 - 2.5 |
| Chemicals & Products | ||
| Indicative Refining Margin ($/bbl) | 9 | 16 |
| Indicative Chemicals Margin ($/tonne) | 153 | 116 |
| Refinery Utilisation | 85% | 82% - 86% |
| Underlying Opex ($B) | 2.9 | 2.8 - 3.2 |
| Renewables & Energy Solutions | ||
| Adjusted Earnings ($B) | 0.2 | (0.3) - 0.3 |
| Corporate | ||
| Adjusted Earnings ($B) | (0.7) | (0.6) - (0.4) |
| Shell Group | ||
| Tax Paid ($B) | 2.7 - 3.5 | |
| Working Capital ($B) | (4) - 0 |
Material Changes and Segment Commentary
- Integrated Gas: Production and LNG liquefaction volumes are expected to decrease due to scheduled maintenance at Prelude and Trinidad and Tobago facilities.
- Upstream: Production is expected to remain stable. Exploration well write-offs are estimated at approximately $0.2 billion. Joint venture and associate profit share is expected to be near zero.
- Chemicals & Products: Indicative refining margins are projected to improve significantly to $16/bbl from $9/bbl in Q2. Conversely, chemicals margins are expected to decline to $116/tonne from $153/tonne. Chemicals sub-segment adjusted earnings are expected to align with Q2 2023.
- Trading & Optimisation: Expected to be higher in both Integrated Gas and Chemicals & Products compared to Q2 2023.
- Marketing: Results are expected to be similar to Q3 2022.
Guidance, Risks, and Unusual Items
Guidance and Outlook: The filing references the 'Quarterly Databook' for full-year price and margin sensitivities. Consensus estimates for quarterly Adjusted Earnings and Adjusted EBITDA are expected to be published by Vara Research on October 26, 2023.
Unusual Items and Adjustments: The outlook excludes identified items. Q3 2023 includes expected exploration well write-offs of ~$0.2 billion in the Upstream segment. Working capital estimates have a broad range of uncertainty.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Key risks include price fluctuations in crude oil and natural gas, demand changes, currency fluctuations, regulatory developments regarding climate change, and geopolitical risks. Shell notes that its operating plans reflect a ten-year horizon and may not fully capture the 2050 net-zero emissions target.
Investor Verification Checklist
- Verify the impact of scheduled maintenance on Integrated Gas production volumes (Prelude and Trinidad and Tobago).
- Confirm the divergence between improving refining margins ($16/bbl) and declining chemicals margins ($116/tonne) in the Chemicals & Products segment.
- Monitor the realization of the $0.2 billion exploration well write-off in the Upstream segment.
- Review the broad range of working capital estimates (-$4B to $0B) for cash flow implications.
- Check the final Q3 2023 results on November 2, 2023, to compare against these outlook ranges.