Shell expects lower Q1 earnings from natural gas trading

Shell expects the trading results in its Integrated Gas division to be lower in the first quarter of 2024 compared to an exceptionally strong fourth quarter of 2023, the UK-based supermajor said in an earnings preview on April 5.

The trading and optimization results in Integrated Gas “are expected to be strong, but significantly lower than an exceptional Q4’23,” the company said ahead of the results release on May 2.

In the chemicals and products division, however, Shell sees trading and optimization to have been “significantly higher” in the first quarter compared to the previous quarter.

In the upstream business, the supermajor expects a first-quarter exploration write-off of around $600 million, mainly in Albania.

Earlier this year, Shell reported adjusted earnings of $7.3 billion for the fourth quarter of 2023, well ahead of estimates of $6.4 billion, thanks to strong LNG trading and optimization results. Even the chemicals and products segment, for which Shell had anticipated a loss for Q4, posted a surprise profit.

Full-year 2023 earnings stood at $28.25 billion.

Despite lower annual income for 2023 compared to its record-high profit of 2022, Shell raised its quarterly dividend and announced a new share buyback after beating consensus estimates for the fourth quarter and full year.

Shell earned $2.4 billion from LNG trading in the fourth quarter of 2023 amid strong demand for the fuel ahead of the winter, with LNG trades contributing to almost a third of its Q4 adjusted earnings, sources close to the supermajor told Reuters in February.

During the fourth quarter of 2023, ahead of peak winter in the northern hemisphere, there were a lot of arbitrage opportunities between the Atlantic Basin and Asia, which benefited Shell’s performance in LNG trading, chief executive Wael Sawan said on the earnings call in early February.

Shell believes in the long-term demand growth in LNG and will continue to look at LNG and LNG trading as one of the pillars of its business.