Shell anticipates ‘significantly lower’ gas trading as investors ‘sit on hands’
Shell said it anticipates “significantly lower” gas trading in its second quarter results, but questions remain about the energy titan’s claim it’s linked to ‘seasonality’.
Ahead of their 27 July results, the firm claims its expected dip was down to “seasonality” in the market, while stressing that the performance would be “in line” with the same quarters in 2022 and 2021
The oil and gas giant also reported $3bn (£2.4bn) of writedowns between April and June due to a one per cent increase in the discount rate used for impairment testing.
Shell shares dipped slightly in early trading, sitting at 0.2 per cent by 10am.
It comes after last year’s swings in the European gas market – prompted by Russia’s invasion of Ukraine – helped produce bumper profits for the energy giant, with two thirds of its full-year profits attributed to the sale of more than 16 million tonnes of liquified natural gas.
February’s annual results announcement saw Shell more than double its annual profit to a record $39.9bn (£32.2bn), while the oil giant’s boss Wael Sawan sparked controversy with statements that the world would need fossil fuels for years to come.
This week, it was reported that Shell, BP and Barclays felt the wrath of activist investors this year as corporate pressure campaigns are launched in record numbers across Europe.
Russ Mould, investment director at AJ Bell, questioned whether the dip in gas trading today was wholly down to Shell’s claims of seasonality of the market.
“How much the drop in earnings from its natural gas trading operation is a function of what Shell describes as ‘seasonality’ in the market, and how much it is just cyclical weakness linked to a softening economy is an open question,” he said.
Its chemicals segment is also expected to post a loss in July’s results.
“Investors appear to be sitting on their hands rather than coming down on one side or another judging by this morning’s share price reaction,” Mould said.
He added: “The company also expects the numbers to be marred by field maintenance which will limit production. Even considering a record first quarter of the year Shell has fallen behind its US peers and there is a danger a weak showing could undermine it further.”
Yesterday, Shell’s US-rival Exxon Mobil said that its second quarter earnings would dip by around $4 billion (£3.1bn), partly as a result of lower natural gas prices.