Shell increases earnings by at least $1bn

Shell reported another record quarter for its gas traders. This sent its shares up more than 2% as analysts raised their profit forecasts.

Europe’s largest oil and gas company said profits from its liquefied natural gasoline (LNG) trading business are expected to be similar to the fourth quarter. This was when strong trading results were credited with driving record-breaking performance for the larger LNG division.

Shell gave a quick trading update prior to its first quarter results next year. It also stated that its LNG business had seen an increase in volumes due to increased availability from its facilities, including the Prelude floating plant.

Shell’s chemicals and fuels division stated that the expected trading performance would be significantly better than the weak fourth quarter result.

Analysts believe that the positive guidance led to an increase in earnings of Shell by at least $1 billion. After a volatile few days for oil prices, the shares of Shell closed at £24.17 yesterday by 54p or 2.3%.

Shell, which is based in London has operations in 70 countries. It reported record annual profits last year of $40 billion. This was due to the volatile and high prices that resulted from Russia’s invasion. It produces oil and gas, with a total output of 2.9 million barrels per day last year. But it also has an extensive and secretive energy trading operation. It is the largest trader in LNG, super-cold gas that can be transported by tanker.

The fourth quarter saw record adjusted earnings by Shell’s integrated gas business. This includes LNG production, trading and trading. These figures account for almost half of the group’s quarterly earnings, $9.8 billion.

Analyst at Citi Alastair Syme stated that while consensus estimates for Shell’s first quarter profits have fallen to $7.5 billion in recent weeks, he expects that they will rise again after the positive trading update. He said that this was due to the positive trading results in both oil and gas businesses, and is supported by an operating performance that matches expectations. “Citi’s latest forecasts point at $8.6 billion in net income.”

Biraj Borkhataria of RBC Capital Markets stated that it has increased its estimate to $8.8 Billion from $7.5 Billion previously. He stated that the trading update showed encouraging signs. He said, “Another strong quarter in LNG trading is ofcourse positive.” “But, Shell is showing some operational momentum and has increased its liquefaction guidance. This is the first time in quite a while.”

Shell stated that its liquefaction volumes are expected to reach between 7 million to 7.4 million tonnes. This is an increase from 6.8 million in quarter 4. Thanks to Prelude’s “higher uptime” and QGC, Shell’s business in Queensland, Australia, Shell expects a higher volume of liquefaction.

Borkhataria said: “We expect another strong quarter from Shell.”

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