Shell (SHEL) Stock Jumps 3% as Q2 Production and Trading Outlook Raised

TLDR

• Shell raised its Q2 integrated gas production outlook to 610,000–650,000 boe/d, up from the prior 580,000–640,000 range.
• SHEL stock rose more than 3% in early London trading following the update.
• Gas trading results are expected to be well above Q1 levels, while chemicals and products trading is forecast in line with Q1.
• A working capital inflow of $1 billion–$6 billion is expected in Q2, reversing an $11.2 billion outflow in Q1.
• Middle East conflict continues to weigh on Qatari volumes, with Shell’s Pearl GTL plant in Qatar still offline after a March attack.

Shell (SHEL) stock climbed more than 3% in early London trading on Tuesday after the company lifted its second-quarter production and trading outlook, offering investors a clearer picture ahead of its July 30 earnings report.

Shell plc, SHEL

The update pushed SHEL shares up around 3.2% by mid-morning in London, outperforming a 0.3% gain across the broader European energy sector.

Shell raised its integrated gas production guidance to 610,000–650,000 barrels of oil equivalent per day (boe/d) for Q2, up from the previous range of 580,000–640,000 boe/d. That’s still well below the 909,000 boe/d produced in Q1, however.

The gap is largely down to disruptions in the Middle East. Shell’s Pearl gas-to-liquids plant in Qatar was knocked offline in March after an attack on Ras Laffan Industrial City damaged one of its two production trains. Repairs are expected to take around a year.

Qatar accounts for roughly 10% of Shell’s total oil and gas output, which itself represents about 20% of the company’s global production — around 550,000 boe/d in total from the region.

LNG liquefaction volumes were also guided higher, at 7.4 million to 7.8 million metric tons for the quarter, up from prior guidance of 6.8 to 7.4 million tons but still below the 7.9 million tons produced in Q1.

Trading and Margins Pick Up

The more upbeat part of the update came from trading. Shell said gas trading and optimisation results would be “significantly higher” than in Q1, a boost that’s been helped by sharp swings in commodity prices tied to the broader Middle East conflict.

Brent crude averaged around $97 a barrel in Q2, up from $78 in Q1 and $67 a year ago. European gas prices at the TTF hub averaged roughly €46 per megawatt-hour, compared with €40 in Q1 and €36 a year earlier.

Citi raised its Q2 EPS forecast for Shell by 13% following the update, calling it “incrementally positive” and highlighting strength in trading, chemicals, and fuels marketing.

Indicative refining margins came in at around $20 per barrel for Q2, up from $17 in Q1. Chemicals margins jumped to approximately $240 per ton from $139. Shell noted that realised margins came in below those headline figures due to market dislocations.

Liquidity Swings Back

On the balance sheet side, Shell forecast a working capital inflow of $1 billion to $6 billion in Q2. That’s a sharp reversal from the $11.2 billion outflow recorded in Q1, which the company attributed to “unprecedented volatility in commodity prices.”

Tax payments are guided higher at $2.6 billion to $3.4 billion, up from $2.3 billion in Q1.

Upstream production guidance was also nudged up to 1.75 million–1.85 million boe/d, from the prior range of 1.62 million–1.82 million boe/d.

Refinery utilisation is expected at close to 100%, while chemicals plant utilisation is guided at 80%–84%, slightly below Q1’s 85%.

Renewables and Energy Solutions adjusted earnings are guided in a wide range of a $0.3 billion loss to a $0.3 billion profit.

Shell’s Q2 results are scheduled for July 30. Consensus estimates are due to be published July 22.

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