Shell, the FTSE 100 oil and gas major, has raised its third-quarter production and refining margin forecasts, signalling a stronger-than-expected operational performance ahead of its full results on 29 October.
The company's updated outlook shows Integrated Gas production climbing to between 740,000 and 780,000 barrels of oil equivalent per day (kboe/d) in Q3, up sharply from 631,000 kboe/d in Q2 and well ahead of the 570,000-630,000 range it had previously guided for.
Shell said the upgrade reflects the completion of its acquisition of ARC Resources on 2 September, which has added materially to output.
Upstream production is expected to come in at 1,735,000-1,835,000 kboe/d, broadly in line with the prior quarter's 1,824,000 kboe/d, though Shell flagged exploration well write-offs of approximately $300 million.
The refining picture has improved markedly, with Shell's indicative refining margin rising to $42 per barrel in Q3 from $24 per barrel in Q2.
Chemicals margins moved in the opposite direction, falling to $208 per tonne from $270 per tonne, though chemicals plant utilisation is expected to hold broadly steady at 81%-85%.
Refinery utilisation is forecast at 93%-97%, slightly below the prior quarter's 102%, with low Rhine water levels constraining throughput at Shell's Rheinland facility in Germany.
Marketing adjusted earnings are expected to come in lower than Q2, while the Renewables and Energy Solutions division is guiding for adjusted earnings of zero to $400 million, compared with $100 million in the second quarter.
On cash flow, Shell flagged an approximately $2.5 billion outflow in the quarter related to the timing of payments for emissions certificates under Germany's Brennstoffemissionshandelsgesetz (BEHG) fuel emissions trading scheme, which is historically settled in the fourth quarter but is being recognised earlier in underlying cash flow from operations.
Net debt will also be affected by the cash consideration and debt assumed as part of the ARC Resources deal, as well as an increase in variable components of long-term shipping leases.
Shell also noted that non-cash post-tax impairments on biogas assets in its Marketing division are expected to be largely offset by an impairment reversal in Integrated Gas, with both items treated as identified items outside adjusted earnings.
Full third-quarter results are scheduled for 29 October.
