Shell PLC (LSE:SHEL, NYSE:SHEL) has updated investors on trading in the first quarter of 2023 forecasting upstream adjusted earnings of between US$2.8bn to US$3.1bn compared to US$2.9bn in the fourth quarter of 2022.
The oil major said profit from joint ventures and associates and Exploration well write-offs in the division are expected to be in line with the historical averages.
But the FTSE 100-listed company said a number of one-off tax charges would hit corporate earnings and forecast an adjusted loss of between US$0.9bn to US$1.2bn, a widening from a US$0.6bn loss in the fourth quarter of 2022.
Shell said it expects first-quarter integrated gas adjusted earnings of between US$1.2bn to US$1.6bn (Q4: US$1.4bn) with a higher tax charge due to favourable movements in pensions in the previous period. A US$0.9bn tax charge is expected for the fourth quarter of last year, rising to US$1.0-1.4bn in the first of this.
Shell forecast integrated gas output would rise to between 930,000-970,000 barrels of oil equivalent (boe) in the quarter, up from 917,000 boe in the prior quarter.
The company, which is due to release full quarterly results on 4 May, said marketing earnings are expected to be higher than in the fourth quarter although it gave an earnings range of between US$0.2bn to US$0.6bn (Q4: US$0.4bn).
In chemicals, the realised margin in the first quarter is expected to be below US$100 per tonne, mainly due to lower utilisation from a slower than expected ramp-up of Shell Polymers Monaca (US).
Earnings are seen in a range of between US$0.8bn to US$1bn (Q4: US$0.8bn).
Analysts at Jefferies said the trading update "points to a good operational delivery during the quarter, falling opex and a strong contribution from trading".
Cash taxes were lower than expected and working capital unchanged at the mid-point of guidance "should help Shell keep quarterly buybacks flat at $4bn which is our assumption".
Analyst Danni Hewson at AJ Bell said the update pointed to a "big loss" but investors were shrugging it off as it is "a quirk of accounting – reflecting one-off tax charges which could well be the result of booking the impact of future windfall taxes upfront".
And, based on the performance of the company’s other business units, she said "you would still expect Shell to be generating plenty of cash to fund its dividend".
All oil majors are having to "balance the temptation to take advantage of strong commodity prices today and reward shareholders with generous returns of capital with a need to future-proof their businesses", she said.
"Regardless of the energy transition, oil and gas are inherently cyclical and a global recession could hit demand.
"A significantly larger contribution from Shell’s renewables unit is a sign of some progress but proportionally this remains the equivalent of a tiny seedling in a big pile of mud."
*** Update with comment from brokers ***