Shell Third Quarter 2021 Update Note

Source: www.gulfoilandgas.com 10/7/2021, Location: Europe

The following is an update to the third quarter 2021 outlook. Impacts presented may vary from the actual results and are subject to finalization of the third quarter 2021 results, published on October 28, 2021. Unless otherwise indicated, all outlook statements exclude identified items.

Hurricane Ida in the US Gulf of Mexico had an impact on our operations and is expected to have an aggregate adverse impact of around $400 million on Adjusted Earnings and CFFO in the third quarter 2021. Individual segmental impacts on Adjusted Earnings are further detailed below.

Integrated Gas

Adjusted EBITDA
• Production is expected to be between 890 and 950 thousand barrels of oil equivalent per day.
• LNG liquefaction volumes are expected to be between 7.0 and 7.5 million tonnes, reflecting feedgas constraints and additional maintenance.
• Trading and optimisation results are expected to be higher compared to the second quarter 2021. • Underlying Opex is expected to be similar to the second quarter 2021.

Adjusted Earnings
• Pre-tax depreciation is expected to be between $1.3 and $1.4 billion.
• Taxation charge is expected to be between $500 and $900 million.

Cash flow from operations
• CFFO excluding working capital is expected to be significantly impacted by large variation margin inflows on the back of the prevailing gas and electricity price environment; these inflows are expected to be higher than the second quarter 2021.
• Tax paid is expected to be between $200 and $400 million.

Upstream

Adjusted EBITDA
• Production is expected to be between 2,025 and 2,100 thousand barrels of oil equivalent per day including impacts from Hurricane Ida (~90kboe/d).
• Underlying Opex is expected to be between $100 and $350 million higher than the second quarter 2021.

Adjusted Earnings
• Pre-tax depreciation is expected to be between $3.1 and $3.4 billion.
• Pre-tax exploration well write-offs are expected to be between $300 and $400 million.
• Taxation charge is expected to be between $1.2 and $1.7 billion. Second quarter 2021 taxation charge included a one-off release of a non-cash tax provision of approximately $600 million.
• As a result of Hurricane Ida, Adjusted Earnings is expected to be adversely impacted by between $200 and $300 million.
• Adjusted Earnings is not expected to be significantly impacted by the prevailing strong gas price environment.

Cash flow from operations
• Tax paid is expected to be between $900 and $1,100 million.

Oil Products

Adjusted EBITDA
• Marketing margins are expected to be in line with the second quarter 2021.
• Refining indicative margin is around $5.70/bbl, higher than the $4.17/bbl in second quarter 2021.
• Sales volumes are expected to be between 4,300 and 5,300 thousand barrels per day.
• Refinery utilisation is expected to be between 70% and 74%, lower compared to the second quarter 2021, due to the impact of Hurricane Ida.
• Trading and optimisation results are expected to be similar to the second quarter 2021.
• Underlying Opex is expected to be up to $100 million higher than the second quarter 2021.

Adjusted Earnings
• Pre-tax depreciation is expected to be between $800 and $1,000 million.
• Taxation charge is expected to be between $100 and $500 million.
• As a result of Hurricane Ida, Adjusted Earnings is expected to be adversely impacted by between $50 and $100 million.

Cash flow from operations
• Tax paid is expected to be between $100 and $250 million.
• Working capital outflows are expected due to the higher commodity price environment.

Chemicals

Adjusted EBITDA
• Chemicals margins as well as associated JV earnings are expected to be lower than the second quarter 2021 by $100 to $200 million, primarily due to weaker intermediate margins.
• Chemical sales volumes are expected to be between 3,400 and 3,700 thousand tonnes.
• Chemicals manufacturing plant utilisation is expected to be between 74% and 78%, lower compared to second quarter 2021 due to the impact of Hurricane Ida.
• Underlying Opex is expected to be up to $100 million higher than the second quarter 2021.

Adjusted Earnings
• Pre-tax depreciation is expected to be between $250 and $300 million.
• Taxation charge is expected to be up to $150 million.
• As a result of Hurricane Ida, Adjusted Earnings is expected to be adversely impacted by around $100 million.

Cash flow from operations
• CFFO is expected to be negatively impacted by $200 to $300 million, compared to second quarter 2021, due to lower dividends from Joint Venture and Associates.
• Tax paid is expected to be up to $50 million.

Corporate
Corporate segment Adjusted Earnings are expected to be a net expense of $650 to $750 million for the third quarter. This excludes the impact of currency exchange rate effects.

Full-year price and margin sensitivities
The Adjusted Earnings and CFFO price and margin sensitivities are indicative and subject to change. These are in relation to the full-year results and exclude short-term impacts from working capital movements, production seasonality, cost-of-sales adjustments and derivatives. Sensitivity accuracy is subject to trading and optimisation performance, including short-term opportunities, depending on market conditions. These sensitivities are reviewed and updated annually.

Indicative refining margin
The indicative margin is an approximation of Shell’s global net realized refining margin, calculated using price and margin markers from third parties’ databases. It is based on an approximation of Shell’s crude intake and production from refinery units. The actual margins realized by Shell may vary due to factors including specific local market effects, refinery configuration, crude diet, operating decisions and production.

Q3 2021: $5.70/bbl
Q2 2021: $4.17/bbl
Q1 2021: $2.65/bbl
Q4 2020: $1.59/bbl

The formula provided will be reviewed and updated annually, reflecting any changes in our refining portfolio.

Calculation formula ($/bbl) - note that brackets indicate a negative sign
Brent*(25%) + MSW*(11%) + LLS*(24.5%) + Dubai*(24.5%) + Urals CIF EU*(13%) + NWE Naphtha (RDAM FOB Barge)*8% + NWE Mogas premium unleaded*12.50% + NWE Kero*11.50% + NWE AGO*24.5% + NWE Benzene*1% + Sing Fueloil 380 cst*6.50% + Edmonton ULG Reg*3.50% + Edmonton ULSD*3.50% + USGC Normal Butane*1.50% + USGC LS No 2 Gasoil*7% + USGC Natural Gas*(2%) + USGC CBOB*15% + RINS*(20.50%) + NWE Propylene Platts*0.50% – $1.7/bbl

Consensus
The consensus collection for quarterly Adjusted Earnings, Adjusted EBITDA (NEW) and CFFO excluding working capital movements, managed by Vara research, will be published on 21 October 2021.


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