Shell Says Gas-Trading Earnings Were Higher Despite LNG Woes

(Bloomberg) -- Shell Plc said its gas-trading earnings were “significantly higher” in the final three months of 2022 as the unit previously run by the company’s new boss overcame some of the challenges encountered earlier in the year. 

The update published on Friday suggests the company may avoid a repeat of what happened in the third quarter, when Shell’s peers were much more successful in profiting from record gas prices in Europe. 

Still, the overall impact on the energy giant’s bottom line remains uncertain amid a trend of falling energy prices. Earlier this week, Exxon Mobil Corp. said its fourth-quarter earnings took a hit of about $3.7 billion from weaker oil and natural gas. 

“There’s probably a bit of relief from investors around integrated gas trading,” said Biraj Borkhataria, an analyst at RBC Capital Markets. “Last quarter was poor and they were adamant it wasn’t structural. So it’s good to see good numbers coming through on that front.”

Shell shares gained as much as 1.7% in London.

The swings in performance highlight the opportunities and challenges ahead for Chief Executive Officer Wael Sawan, who took over the top role just a few days ago. Shell and its peers enjoyed a huge influx of cash last year, and whether this continues will be a key determinant the companies’ ability to keep increasing returns to shareholders while also investing in cleaner energy. 

Yet this could be another volatile year for energy markets as the world contends with the impact of Russia’s ongoing war in Ukraine, a slowing global economy and China’s effort to lift Covid-19 restrictions. Crude oil has tumbled more than 40% from its 2022 peak, while mild weather has sent European natural gas prices plunging to levels last seen before the invasion.

There’s also the continued risk of further government intervention into energy markets. Shell said it faces a total bill of $2.4 billion from windfall tax measures in the UK and the European Union in 2022. 

Shell’s output of liquefied natural gas in the fourth quarter was between 6.6 million and 7 million tons, down from 7.2 million in the prior period due to problems at the Prelude and QGC projects in Australia. 

The company’s indicative refining margins rose about 27% compared to the previous quarter to $19 a barrel. Chemicals margins also recovered to $37 a ton after turning negative in the third quarter. 

(Updates first paragraph with context.)

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