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Shell first quarter 2021 update note

Thursday, 08 April 2021 | 00:00

This is an update to the first quarter 2021 outlook provided in the fourth quarter results announcement on February 4, 2021. The impacts presented here may vary from the actual results and are subject to finalisation of the first quarter 2021 results. Unless otherwise indicated, presented impacts relate to Adjusted Earnings on a post-tax basis.

The Texas winter storm had an impact on our operations and is expected to have an aggregate adverse impact of up to $200 million on Adjusted Earnings, individual segmental impacts are further detailed below.

Integrated Gas

• Production is expected to be between 920 and 960 thousand barrels of oil equivalent per day.
• LNG liquefaction volumes are expected to be between 7.8 and 8.4 million tonnes.
• Pre-tax depreciation is expected to be between $1.3 and $1.4 billion.
• Trading and optimisation results are expected to be significantly below average.
• Approximately 80% of our term sales of LNG in 2020 have been oil price linked with a price-lag of up to 6 months. The volatility of the JKM spot price in January had limited impact on Adjusted Earnings.
• Operational and net financial impact from the Texas winter storm is expected to be limited as trading margins are offset by provisions due to related counterparty credit risk.
• CFFO is expected to be impacted by a working capital outflow driven by increased receivables reflecting the higher commodity price environment.
• CFFO excluding working capital is expected to be not significantly impacted by cash flows related to commodity derivatives.

Upstream

• Adjusted Earnings are expected to be positive in the first quarter 2021, capturing the upside from the current commodity price environment.
• Production is expected to be between 2,400 and 2,475 thousand barrels of oil equivalent per day, including 10 to 20 thousand barrels per day lower production due to the Texas winter storm.
• Total Adjusted Earnings are expected to be adversely impacted by up to $40 million due to operational impacts of the Texas winter storm.
• Pre-tax depreciation is expected to be between $3.1 and $3.4 billion.
• Currency effects are expected to adversely impact Adjusted Earnings by up to $200 million.
• Tax expenses are expected to be between $700 and $1,100 million.
• Tax paid is expected to be between $500 and $750 million.
• Working capital outflows as expected due to increased receivables reflecting the higher commodity price environment.

Oil Products

• Refinery utilisation is expected to be between 71% and 75%. Latest refinery crude distillation capacities are provided in the 2020 Annual Report, replacing calendar-day with stream day.
• Refining indicative margin is around $2.6/bbl, slightly improved from $1.6/bbl in the fourth quarter 2020. Definition and formula are provided at the end of this release.
• Trading and optimisation results are expected to be average and higher than the fourth quarter 2020.
• Sales volumes are expected to be between 3,700 and 4,700 thousand barrels per day.
• Marketing results are expected to be higher compared with the fourth quarter 2020, as higher margins and lower costs are more than offsetting lower sales volumes.
• Pre-tax depreciation is expected to be between $0.9 and $1.1 billion.
• Total Adjusted Earnings are expected to be adversely impacted by up to $80 million due to operational impacts of the Texas winter storm.
• Working capital outflows are expected due to the higher commodity price environment.
• CFFO excluding working capital is expected to be positively impacted by the lower cash cost of sales.

Chemicals

• Chemicals Adjusted Earnings are expected to be positively impacted by improved base margins and slightly higher intermediate margins compared with the fourth quarter 2020.
• Chemicals manufacturing plant utilisation is expected to be between 77% and 81%.
• Chemicals sales volumes are expected to be between 3,500 and 3,700 thousand tonnes.
• Pre-tax depreciation is expected to be between $250 and $350 million.
• Total Adjusted Earnings are expected to be adversely impacted by around $60 million due to operational impacts of the Texas winter storm.
• CFFO is expected to be negatively impacted by $150 to $250 million due to timing effect of dividends received from Joint Ventures & Associates.

Corporate

• Corporate segment Adjusted Earnings are expected to be a net expense of $600 to $700 million for the first quarter. This excludes the impact of currency exchange effects.

Shell enhancing financial disclosures

At our first quarter 2021 results announcement we are planning to provide enhanced voluntary disclosures in a Quarterly Databook, to be available on www.shell.com/investors. The disclosures will cover Integrated Gas, Upstream, Refining & Trading, Marketing and Chemicals. The publication of the enhanced disclosures will be followed by a webcast on the 4th of May 2021, with an opportunity for Q&A.

Full-year price and margin sensitivities

The Adjusted Earnings and CFFO price and margin sensitivities are indicative and in relation to the full-year results. These exclude the short-term impacts from working capital movements, cost-of-sales adjustments and derivatives. Sensitivity accuracy is subject to trading and optimisation performance, including short-term opportunities, depending on market conditions.

Indicative refining margin

The indicative margin is an approximation of Shell’s global net realised refining margin, calculated using price and margin markers from third parties’ databases. It is based on an approximation of Shell’s crude intake and production from refinery units. The actual margins realised by Shell may vary due to factors including specific local market effects, refinery configuration, crude diet, operating decisions and production.

Q1 2021: $2.65/bbl
Q4 2020: $1.59/bbl
Q3 2020: $0.84/bbl

The formula provided will be reviewed and updated annually, reflecting any changes in our refining portfolio.

Calculation formula ($/bbl) – note that brackets indicate a negative sign

Brent*(25%) + MSW*(11%) + LLS*(24.5%) + Dubai*(24.5%) + Urals CIF EU*(13%) + NWE Naphtha (RDAM FOB Barge)*8% + NWE Mogas premium unleaded*12.50% + NWE Kero*11.50% + NWE AGO*24.5% + NWE Benzene*1% + Sing Fueloil 380 cst*6.50% + Edmonton ULG Reg*3.50% + Edmonton ULSD*3.50% + USGC Normal Butane*1.50% + USGC LS No 2 Gasoil*7% + USGC Natural Gas*(2%) + USGC CBOB*15% + RINS*(20.50%) + NWE Propylene Platts*0.50% – $1.7/bbl

Consensus
The consensus collection for quarterly Adjusted Earnings and CFFO excluding working capital movements, managed by VARA research, will be published on 22 April 2021.

Source: Shell

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