Shell Plc has lowered its natural gas and LNG production expectations for the first quarter of 2025 due to unexpected maintenance in Australia and severe weather conditions.
In a trading update released on Monday, the London-based energy giant projected its integrated gas production to range between 910,000 and 950,000 barrels of oil equivalent. While this marks an improvement over the fourth quarter of 2024, it falls short of the previously expected range stated in the last quarterly report.
However, Shell reported positive developments in other areas. Oil production is expected to slightly exceed earlier forecasts, refining margins have improved, and the company anticipates a strong performance in oil trading.
Challenges for CEO Wael Sawan
CEO Wael Sawan has faced the challenge of narrowing the valuation gap with U.S. competitors. Under his leadership, Shell has focused on cost-cutting measures, refocusing efforts on oil and gas, and scaling back investments in underperforming clean energy sectors. Additionally, the company has committed to returning 40% to 50% of its cash flow to shareholders, up from the previous 30% to 40%.
Impact of Recent Global Market Volatility
Shell’s update focuses on the first quarter of 2025, and does not take into account the global market volatility that unfolded last week. U.S. President Donald Trump’s announcement of tariffs sparked widespread selloffs in equity and commodity markets, while China retaliated with its own measures. Oil prices were particularly affected, falling to a four-year low after a combination of tariff-related losses and an unexpected increase in supply from OPEC+.
Shell’s shares suffered a significant drop, falling by more than 11% last week as part of the broader market downturn. The stock continued to decline at the opening in London on Monday.
Lower Gas and LNG Volumes
Shell’s trading update confirmed that unplanned maintenance, including in Australia, had impacted integrated gas production. The company also noted that adverse weather conditions, including cyclones, had contributed to lower LNG volumes. In the previous report, the production forecast had ranged from 930,000 to 990,000 barrels of oil equivalent.
For the first quarter, Shell now expects LNG liquefaction volumes to reach between 6.4 million and 6.8 million tons, down from a previous forecast of 6.6 million to 7.2 million tons.
Oil Production and Refining Margins
In terms of oil production, Shell now forecasts upstream output of 1.79 million to 1.89 million barrels of oil equivalent per day, slightly below the previous projection of 1.75 million to 1.95 million barrels per day. The company also revised its indicative refining margin to $6.2 per barrel, up from $5.5 per barrel in the last quarter of 2024.
Strong Start for Oil Trading
Shell highlighted a robust start to the year for its oil trading division, which rebounded from a weaker performance in the final quarter of 2024. The company expects trading and optimization results to be significantly stronger than the previous quarter, in line with the performance seen in the second and third quarters of 2024.
Although Shell does not provide separate figures for its trading business, which covers oil, natural gas, and electricity, CEO Sawan noted that trading has been profitable every quarter for the past decade.
Focus on LNG Growth
A central element of Sawan’s strategy is to expand Shell’s liquefied natural gas (LNG) business. As the world’s largest LNG trader, Shell plans to increase its sales by 4% to 5% annually through 2030.
For natural gas, the company expects trading and optimization results to match those of the final quarter of 2024, despite the higher non-cash impact of expiring hedge contracts compared to the previous quarter.
Exxon Mobil’s Strong Quarterly Gains
Shell’s performance comes as larger rival Exxon Mobil Corp. reported potential profits of $2.7 billion for the first quarter, driven by higher oil and gas prices, along with strong refining and trading results.
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