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Digging Into Shell's (SHEL) Bright Earnings Outlook for Q1

Shell plc SHEL said its first-quarter results would reflect good performances from the Integrated Gas and Chemicals & Products divisions. The London-based supermajor further revealed that its ‘Marketing’ unit earnings would be sequentially stronger and upstream volumes would go up slightly.  

Now, let’s dig into some other segment-wise selected items from Thursday’s release.

Upstream

According to the latest update, Shell’s upstream production inched up 0.5% on a sequential basis in the first quarter of 2023 at the midpoint of the guidance. The supermajor is estimating its output in the range of 1,800-1,900 MBOE/d compared to 1,859 MBOE/d in the fourth quarter of 2022.

Tax charges are expected to hurt earnings in the range of $2.4-3.2 billion. Meanwhile, Shell sees the share of profit of joint ventures and associates to be around $500 million. The segment’s results are also likely to include well write-offs to the tune of $200 million. Finally, operating expense for the segment is projected at around $2.55 billion.

Integrated Gas

Shell’s LNG liquefaction volumes are expected in the range of 7-7.4 million tons, translating into an increase of around 6% sequentially on the back of more working time at its Australian facilities. Shell’s integrated gas production is expected to grow to the range of 930,000-970,000 barrels of oil equivalent per day (BOE/d) or 950,000 BOE/d at the midpoint. It was 917,000 BOE/d in the December quarter.

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Per the company, first-quarter trading and optimization results in its integrated gas unit will be essentially in line with the fourth quarter of 2022. Segment operating cost is expected between $1.2 billion and $1.4 billion.

Marketing

The midpoint of management’s marketing sales volume guidance equates to 2.45 million barrels per day, lower than the 2.543 million barrels achieved in the fourth quarter of 2022. Overall, segment profits are expected to be above the quarter-ago levels, while operating expenses would be between $1.8 billion and $2.2 billion.

Chemicals & Products

The company expects a considerable gain in its ‘Trading & Optimisation’ results from the fourth-quarter levels. However, as projected by Shell, the refining margin should weaken in the first quarter, with the metric falling 21% sequentially.

Meanwhile, despite chemical margins surging, realized numbers are expected to be adversely impacted primarily by the slow ramp-up of the Pennsylvania Chemicals project. Shell also forecast refinery utilization of 89-93%, operating expense of 2.6-3 billion and chemicals manufacturing plant utilization of 70-74%.

Renewables and Energy Solutions

The adjusted bottom line of this segment is expected to hover between a profit of $100 million and $700 million.

Q1 Estimates

This Zacks Rank #4 (Sell) company, which consolidated its dual headquarters in London over The Hague and became a single United Kingdom (“UK”) entity last year, is slated to release first-quarter 2023 results on May 4. The current Zacks Consensus Estimate for Shell’s to-be-reported quarter is a profit of $2.24 per share.

Key Energy Picks

Meanwhile, investors interested in the energy sector might look at operators like NOW Inc. DNOW, Par Pacific Holdings PARR and Sunoco LP SUN. Each of the companies has a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

NOW Inc.: DNOW beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. NOW Inc. has a trailing four-quarter earnings surprise of 41.3%, on average.

DNOW is valued at around $1.2 billion. NOW Inc. has seen its shares inch up 1.4% in a year.

Sunoco LP: SUN beat the Zacks Consensus Estimate for earnings twice in the trailing four quarters. Sunoco has a trailing four-quarter earnings surprise of 21.6%, on average.

Sunoco is valued at around $4.4 billion. SUN has seen its shares gain 7.7% in a year.

Par Pacific Holdings: Par Pacific beat the Zacks Consensus Estimate for earnings in three of the last four quarters. PARR has a trailing four-quarter earnings surprise of roughly 16.1%, on average.

Par Pacific is valued at around $1.7 billion. PARR has seen its shares surge 100.6% in a year.

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Sunoco LP (SUN) : Free Stock Analysis Report

NOW Inc. (DNOW) : Free Stock Analysis Report

Par Pacific Holdings, Inc. (PARR) : Free Stock Analysis Report

Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report

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