Oil giant Shell (SHEL) cut its outlook for Q1 ahead of the publication of its results on 7 May. The company now expects a quarterly loss of $800 million to $1 billion against $400 million to $600 million previously.
Temporary decrease
Shell warned its Q1 natural gas output would be lower than forecast due to the Middle East conflict. Natural gas is the firm’s biggest source of revenue and profit, representing around 37% of this year’s earnings.
Output is seen at 880,000 to 920,000 boepd (barrels of oil equivalent per day) against 920,000 to 980,000 boepd previously. Production in Qatar was halted in mid-March after the firm’s facility at Ras Laffan Industrial City was damaged.
On the other hand, results at the Marketing division will be ‘significantly higher than Q1 2025’ according to the release. The same applies to the Chemicals and Products division, which includes Shell’s highly lucrative oil trading business.
Meanwhile, the group expects a working capital outflow of $10 billion to $15 billion instead of a small inflow. This is due to the impact of ‘unprecedented volatility’ in commodity prices on its inventory and receivables.
Shell shares are down on today’s update but they are also down thanks to a 10% drop in Brent crude prices. With any luck, Trump’s two-week Middle East ceasefire will hold and prices will begin to stabilise at more sensible levels.
We doubt there will be much upset at today’s Q1 downgrade, nor do we expect the firm to change its FY outlook. Bear in mind its FY26 earnings forecast was based on an average Brent crude price of $63.60/barrel, not today’s $93.60/barrel.
The company has already nudged up its indicative refining margin from $14 to $17/barrel, which is a 21% increase. It has also nudged up the top end of its forecast for refinery utilisation, so it’s not all bad news.
Read the press release here: https://www.shell.com/investors.html
