Business Context and Reporting Period
This Form 6-K filing by Shell plc, dated January 6, 2023, provides an update to the fourth quarter 2022 outlook. The document outlines current expectations for Q4 2022 performance across business segments, noting that final results are scheduled for publication on February 2, 2023. All outlook statements exclude identified items unless otherwise indicated.
Key Financial Metrics and Segment Outlook
The filing provides forward-looking ranges for Adjusted EBITDA, Adjusted Earnings, and production volumes for Q4 2022. Specific segment metrics include:
- Integrated Gas: Production expected at 900-940 kboe/d; LNG liquefaction volumes at 6.6-7.0 MT. Adjusted EBITDA and Adjusted Earnings are impacted by outages at Prelude and QGC.
- Upstream: Production expected at 1,825-1,925 kboe/d. Exploration well write-offs estimated between $150 million and $550 million.
- Marketing: Sales volumes expected at 2,350-2,750 kb/d. Results are expected to be lower than Q3 2022.
- Chemicals & Products: Indicative refining margin projected at $19/bbl (up from $15/bbl in Q3). Indicative chemicals margin at $37/tonne (up from -$27/tonne in Q3). Refinery utilization expected at 88%-92%.
- Renewables and Energy Solutions: Adjusted Earnings expected in the range of ($500) million to $100 million.
- Corporate: Adjusted Earnings expected in the range of ($550) million to ($750) million.
- Shell Group Cash Flow: Tax paid estimated at $4.3 billion to $4.7 billion. Working capital is estimated to provide an inflow of approximately $4 billion.
Material Changes and Operational Impacts
Several material factors are expected to influence Q4 2022 performance compared to the prior quarter:
- Integrated Gas: Lower volumes due to longer-than-expected outages at the Prelude facility and operational issues at QGC in Australia.
- Trading & Optimisation: Expected to be significantly higher in Integrated Gas compared to Q3 2022, but significantly lower in Chemicals & Products.
- Chemicals: Results expected to be lower than Q3 2022, partially due to the commencement of depreciation for the Shell Polymers Monaca project.
- Upstream: Profit from joint ventures and associates is expected to be lower due to no storage transfer effects, lower gas prices, and portfolio effects.
Guidance, Risks, and Unusual Items
Management highlights specific tax impacts and risks that may affect financial results:
- Identified Tax Items: The Q4 2022 earnings impact of additional EU taxes (solidarity contribution) and the deferred tax impact from the increased UK Energy Profits Levy is expected to be around $2 billion. These will be reported as identified items and will not impact Adjusted Earnings. Cash impact in Q4 2022 is expected to be limited due to payment timing.
- Working Capital: Estimations are noted as inherently uncertain due to current market volatility.
- Forward-Looking Risks: The filing lists standard risks including price fluctuations in crude oil and natural gas, currency fluctuations, regulatory developments regarding climate change, and geopolitical risks.
- Consensus Data: Consensus collections for quarterly Adjusted Earnings, Adjusted EBITDA, and CFFO are expected to be published on January 26, 2023.
Investor Verification Checklist
- Verify the final Q4 2022 results upon publication on February 2, 2023, to confirm if actuals align with the provided outlook ranges.
- Monitor the timing and cash impact of the ~$2 billion in additional EU and UK taxes, which are excluded from Adjusted Earnings.
- Track the resolution of operational outages at Prelude and QGC to assess future Integrated Gas production volumes.
- Review the Q3 2022 Quarterly Databook for full-year price and margin sensitivities referenced in the guidance.
- Confirm the impact of the Shell Polymers Monaca depreciation commencement on Chemicals segment margins.