UBS analysts have been digesting Shell’s trading update today which it described as mixed against its expectations.
On the positive side, Shell flagged that Integrated Gas trading is expected to be significantly higher quarter on quarter with the comments suggesting the performance could have been better than UBS expected in the fourth quarter.
LNG liquefaction volumes were cut to 6.6-7.0mln tonnes from the previous guidance at 7.0-7.6mln tonnes although UBS said this should not come as a surprise given the recent outage at QC LNG in Australia.
Integrated Gas production was cut marginally to 900-940,000 boe/day from previous guidance of 910-960,000 while upstream production was raised marginally to 1,825-1,925,000 boe/day from previous guidance at 1,750-1,950,000 boe/day.
UBS pointed out that guidance for total production is thus “virtually unchanged” at the mid-point at 2,795,000 boe/day.
But the bank said the update on the downstream side was more negative.
Trading and optimisation results are expected to be significantly lower than the third quarter and Chemicals results are expected to be down quarter on quarter as well, against an expected increase.
This is driven by the start-up of the Pennsylvania Chemicals project, which has started to be depreciated but is still in ramp-up phase, UBS explained.
A working capital inflow of around US$4bn was ahead of the US$3.1bn UBS expected while the estimated windfall tax of US$2bn was in line with their forecasts.
The broker retained a buy rating and 2,650p price target while the shares rose 1.7% with additional support coming from a rise in the oil price with Brent crude up 1.37% to US$79.75/barrel.