Shell Sees $4 Billion-$5 Billion Hit from Exiting Russia in 1Q Results
2022.04.07 10:16
By Geoffrey Smith
Investing.com — Shell (LON:RDSa) expects a hit to earnings of as much as $5 billion after-tax in the first quarter as a result of its abrupt exit from Russia, the energy giant said Thursday.
Europe’s biggest oil and gas producer announced it would divest Russian businesses almost immediately after Vladimir Putin’s invasion of Ukraine in February. While it continued to buy Russian oil for its trading operations, it soon had to discontinue that, too, after outrage at its participation in an export tender by one of the country’s largest producers.
The company said its adjusted earnings will still accurately reflect the company’s performance, which will be heavily influenced by the surge in oil prices during the quarter. A $10 rise in Brent generates roughly $2.5 billion in Shell’s adjusted earnings from oil and another $1 billion in earnings from gas, according to its latest estimates.
Trading profit is expected to leap as its indicative refining margin widened to $10.23 a barrel from $6.55 three months earlier. Shell’s refineries also operated at a slightly higher level in the quarter, at a utilization rate of between 72% and 74%. However, its cash flow from operations is expected to show a $7 billion outflow due to the soaring cost of replacing inventory and other factors.
Shell said it expects to report production of between 1.9 million and 2.05 million barrels of oil equivalent per day, down around 50,000 boe/d due to the transfer of its Canada Shales assets to Integrated Gas. Underlying operating costs are seen at around $2.5 billion.
Its other main profit driver, chemicals, will report margins roughly unchanged from the previous quarter (due to higher feedstock costs) but will be supported by the fact that its chemicals plants, like its refineries, ran at slightly higher utilization rates.
