Royal Dutch Shell PLC (LSE:RDSB) shares fell 1.9% in Thursday’s early deals as a trading update for the third quarter revealed the impact of Hurricane Ida.
The hurricane hampered operations through the United States in September and Shell today cautioned the storm will dent its financials by at least US$400mln.
Ida and its disruption to supply is among a number of factors that have seen global fuel prices race higher along with constrained gas volumes going into Europe and a spike in demand for liquefied natural gas (LNG) in Asia.
Shell’s integrated gas business, which manages the firm’s LNG and gas-to-liquids (GTL) fuels production and sales, said it expects third-quarter production of around 890,000 to 950,000 barrels per day.
Trading and optimisation results in the unit are expected to be ‘higher compared to the second quarter 2021’, meanwhile, operating costs are seen in-line. It expects cash flow from operations will be “significantly impacted by large variation margin inflows on the back of the prevailing gas and electricity price environment”.
In the upstream business, Shell’s third-quarter production is expected between 2.02mln and 2.1mln barrels of oil equivalent per day – after Hurricane Ida dealt an impact of around 90,000 boepd in the period, along with US$200mln to US$300mln of associated costs.
In the oil products business, Shell said its marketing margins are expected to be in line with Q2. Meanwhile refining margins are up, at US$5.70 per barrel from US$4.71. Trading and optimisation results are expected to be similar to the second quarter of 2021. Sales volumes are seen between 4.3mln and 5.3mln barrels per day. Shell noted that refinery utilisation for the quarter was between 70% and 74% due to Hurricane Ida.
Shell’s chemicals business is expected to see lower margins for the quarter and its plant utilisation rates are similarly impacted by the hurricane and are expected between 74% and 78%. The unit’s cash flow from operations is seen down about US$200mln to US$300mln compared to the second quarter.
In oil products and chemicals, Shell expects Ida will impact earnings by around US$100mln for each business.