World Stock Watch

Shell’s Q4 Outlook Takes a Hit

LNG Production Forecast Slashed

In a surprise move, Shell has revised its liquefied natural gas (LNG) production outlook for the fourth quarter, citing lower feedgas deliveries and fewer cargo deliveries. The company now expects to produce 6.8-7.2 million metric tons, down from its previous forecast of 6.9-7.5 million tons.

Trading Results Expected to Plummet

Shell’s oil and gas trading results are also expected to take a significant hit in the fourth quarter. The company attributes this decline to the expiry of hedging contracts taken out in 2022 to protect against potential losses following Russia’s invasion of Ukraine. Additionally, trading in its chemicals and oil products division is expected to be lower due to seasonal demand.

Impairments Loom Large

The company will take a non-cash, post-tax impairment charge of $1.5 billion to $3 billion, including up to $1.2 billion in its renewables division. This move is linked to European and North American assets and follows Shell’s decision to step back from new offshore wind investments and split its power division.

Industry-Wide Profit Decline

Shell is not alone in its struggles. The world’s top oil and gas companies have seen profits decline throughout 2024, following record earnings in the previous two years. Energy prices have steadied, and global oil demand has faltered, contributing to the decline.

Exxon Mobil’s Warning

U.S. oil giant Exxon Mobil recently signalled that its fourth-quarter earnings would take a hit of about $1.75 billion due to sharply lower oil refining profits and weakness across all its businesses.

Shell Shares Take a Hit

As a result of the trading update, Shell shares fell 1.5% by 1125 GMT. Despite this, analysts believe the news will not impact shareholder returns.

A Challenging Quarter Ahead

The combination of lower LNG production, weaker trading results, and impairments will make for a challenging quarter for Shell. As the company focuses on its most profitable parts, investors will be watching closely to see how it navigates these headwinds.