- Quarterly loss expected thanks to tax charge
- Production and earnings across the business looking steady
- Boost from OPEC production cut and subsequent oil spike won’t show in these numbers
Energy group Shell (SHEL) was in favour with shareholders despite indicating it would post a loss for the first quarter of 2023.
The shares advanced 1.4% to £23.98 as the company unveiled the usual teaser of its quarterly numbers on Thursday. The full results will be published on 5 May.
Shell pointed towards an adjusted loss in its corporate segment between $900 million and $1.2 billion, widening from $600 million in the fourth quarter of 2022.
The outcome ‘includes one-off tax charges’, the company said. It expects Integrated Gas adjusted earnings pre-tax depreciation between $1.2 billion and $1.6 billion, compared to $1.4 billion in the fourth quarter.
Upstream adjusted earnings are expected between $2.8 billion to $3.1 billion, compared to $2.9 billion in the last three months of 2022.
For Integrated Gas, Shell is guiding for production between 930,000-970,000 boepd (barrels of oil equivalent per day), up from 917,000 boepd in the fourth quarter.
Upstream production volumes are expected to be within a similar range to the previous quarter, between 1.8 million and 1.9 million boepd per day, compared to 1.85 million in the fourth quarter.
A QUIRK OF ACCOUNTING
AJ Bell head of financial analysis Danni Hewson said: ‘There is a reason investors are brushing this news off.
‘The anticipated loss is a quirk of accounting - reflecting one-off tax charges which could well be the result of booking the impact of future windfall taxes upfront. Based on the performance of the company’s other business units you would still expect Shell to be generating plenty of cash to fund its dividend.’
Hewson noted that a recent spike in oil prices on OPEC production cuts should be giving Shell a boost, although not one which will be reflected in these results.
She added: ‘Shell and the rest of the peer group must balance the temptation to take advantage of strong commodity prices today and reward shareholders with generous returns of capital with a need to future-proof their businesses.
“Regardless of the energy transition, oil and gas are inherently cyclical and a global recession could hit demand.
‘A significantly larger contribution from Shell’s renewables unit is a sign of some progress but proportionally this remains the equivalent of a tiny seedling in a big pile of mud.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Tom Sieber) and the editor of the article (James Crux) own shares in AJ Bell.
