As Shell PLC SHEL prepares to release its third-quarter earnings during Thursday’s pre-market session, analysts and investors are closely watching to see how the company has navigated volatile oil and gas markets.
What To Watch For: For the second quarter, Shell delivered strong revenue growth, posting $74.46 billion, which comfortably beat analyst expectations of $61.33 billion.
However, even as revenue surged, Shell faced some notable operational headwinds, with total production in its Integrated Gas and Upstream segments seeing slight quarter-over-quarter declines.
For the third quarter, analyst estimates indicate that Shell is expected to report EPS of $1.66 and revenue of $61.343 billion, reflecting the market’s tempered outlook amid challenging industry conditions.
In the second quarter, Shell's production metrics were mixed. Integrated Gas output dropped 1% quarter-over-quarter, settling at 980 thousand barrels of oil equivalent per day (kboe/d), while Upstream production fell by 5% to 1,783 kboe/d.
These declines, coupled with reduced trading contributions and seasonality effects, contributed to a 19% drop in Shell's adjusted earnings to $6.29 billion.
The company also reported a 10% decline in adjusted EBITDA, coming in at $16.81 billion, partly due to lower realized prices and adverse deferred tax movements. Shell's third-quarter guidance suggests it expects production in Integrated Gas to range between 920 and 980 kboe/d and in Upstream between 1,580 and 1,780 kboe/d, leaving room for continued fluctuations.
What Else: Shell's profitability also faced downward pressure in the second quarter, as net income attributable to shareholders dropped to $3.52 billion from $7.36 billion in the first quarter. However, adjusted earnings per ADS came in above expectations at $1.98, beating the consensus of $1.82.
Cash flow from operating activities remained robust at $13.51 billion, demonstrating Shell's ability to generate steady cash even in a softened earnings environment. The company ended the second quarter with net debt of $38.31 billion and a gearing ratio of 17.0%, underscoring its solid financial position.
Looking forward, Shell's third quarter performance may see a rebound if the company successfully capitalizes on higher Marketing sales volumes and improved operational efficiencies. With projected Marketing volumes of 2,700 to 3,200 thousand b/d for the quarter, Shell's expanded sales capabilities could help offset some production declines.
Additionally, Shell has maintained its FY24 outlook, with cash capital expenditures forecasted between $22 billion and $25 billion, affirming a commitment to long-term growth investments even amid short-term earnings variability.
In the second quarter, Shell also took shareholder-friendly steps, including a 4% boost in its first-quarter dividend per share, which rose to $0.344, and a $3.5 billion share buyback program over a three-month period. The third quarter earnings release will be closely watched to see if these strategies effectively counterbalance ongoing market volatility.
According to data from Benzinga Pro, SHEL has a 52-week high of $74.60 and a 52-week low of $60.34.
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