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LONDON — Shell said on Thursday its third-quarter earnings will be weighed down by nearly halving oil refining margins, collapsing chemical margins and weak natural gas trading.
The UK energy giant posted two consecutive quarters of record profits in the first half of this year, reporting impressive profits from the world’s largest trading operation amid soaring oil and gas prices.
The company’s share price fell 4.3% by 0847 GMT, compared with a 1% decline for the European energy sector as a whole.
But amid growing concerns about a global economic slowdown, Shell said in a pre-earnings update on Oct. 27 that benchmark refining margins for the third quarter had fallen to $15 a barrel, down from $28 a barrel in the past three months. Stated.
Also, chemical margins fell from positive $86 per tonne to -$27 per tonne in the second quarter after global demand for plastics slowed.
Lower refining margins would negatively impact the segment’s earnings before adjusted interest, taxes, depreciation and amortization (EBITDA) by $1 billion to $1.4 billion, Shell said.
Shell also expects cash generation to be impacted by a $2.5 billion outflow of working capital by the end of August as a result of significant oil and gas price volatility in recent months.
Despite headwinds, Shell is expected to report a net profit of $10.5 billion in the third quarter, according to Refinitiv’s average analyst forecast. That compares to her net income of $11.5 billion in the second quarter.
“Overall, we believe this statement is a disappointment given the poor trading performance and working capital outflows in IG[Integrated Gas],” RBC Capital Markets analyst Viraj Bokataria said in a note. rice field.
“We expect to see a consensus downgrade behind this update,” he added. RBC has a “good” recommendation for Shell.
Shell’s third-quarter liquefied natural gas (LNG) and gas trading results were “weak” due to seasonally lower demand and “substantial differences between paper and physical realizations in a volatile and turbulent market.” expected to drop significantly.”
Oil trading is expected to be similar to the previous quarter.
U.S. rival ExxonMobil showed strong third-quarter operating profit on Tuesday as revenues from natural gas offset weakness in refining and chemicals.
Ron Busso
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