Shell said surging demand for oil products that had almost tripled refining profits in the second quarter would boost earnings by up to USD1.2 bn, said Reuters.
In an update before second quarter results on July 28, Shell also said it would reverse up to USD4.5 B in writedowns on oil and gas assets after it raised its energy prices outlook following Russia's invasion of Ukraine. Earnings from oil and refined products trading were expected to be strong in the quarter but lower than the first quarter of 2022, Shell said.
Shell's indicative refining margin rose in the second quarter to USD28.04 per barrel from USD10.23 in the first quarter and USD4.17 a year earlier, driven by a recovery in demand after the pandemic, limited global refining capacity and lower fuel exports from Russia to Western economies.
The increased refining margin is expected to boost the division's earnings by USD800 million to USD1.2 B in the second quarter compared with the first quarter. Shell shares were up 2.7% at 1040 GMT, lower than the 3.3% gains to the broader energy index.
Shell, which posted a record quarterly profit of more than USD9 B in the first quarter, said its cash flow in the second quarter was hit by an outflow of about USD6 B. It said current market volatility would hit cash flows. "We see the statement as neutral given a number of offsetting impacts to results, with the main uncertainty being around the magnitude of working capital outflows," RBC Capital Markets analyst Biraj Borkhataria said in a note.
Oil and gas prices remained elevated in the quarter, with benchmark Brent crude averaging about USD114 a barrel. Shell increased its assumed price for Brent to USD80 a barrel in 2023, up from USD60 in its 2021 annual report. For 2024 and 2025, the Brent price was rose to USD70 a barrel compared with USD60. The long-term price was USD65, compared with USD63.
The upgrade will result in post-tax impairment reversals of USD3.5 billion to USD4.5 billion. Shell wrote down more than USD22 billion in 2020 when the pandemic led to an oil price collapse. Shell said it completed its USD8.5 B share buyback program during the second quarter.
Shell's oil and gas production, expected to reach as much as 2.93 MM barrels of oil equivalent per day, would be its lowest in at least seven years because of maintenance issues. Shell, the world's largest trader of liquefied natural gas (LNG), said its quarterly LNG production was expected to be in a range of 7.4 MM to 8 MM tons.
The figure reflects the removal of LNG volumes from the Sakhalin-2 plant in eastern Russia which Shell plans to exit. Shell's larger rival Exxon Mobil signaled last week that skyrocketing margins from fuel and crude sales could generate a record quarterly profit.
As per MRC, Shell and Dow have started up an experimental unit to electrically heat steam cracker furnaces at the Energy Transition Campus Amsterdam, The Netherlands. This represents a key milestone in the companies’ joint technology program to electrify steam cracking furnaces, bringing the companies one step closer to decarbonizing one of the most carbon intensive aspects of petrochemical manufacturing.
mrchub.com