Jan 7, 2022
Dominic Ellis

Gas upturn spurs $5.5bn Shell shareholder bonanza

Energy
Oil
Gas
LNG
Integrated gas was the standout performer for Shell in Q4 2021 with production around 910-950,000 barrels of oil equivalent per day

Shell shareholders are in line for a $5.5bn windfall after the oil giant announced a share buy back in its Q4 trading update following the sale of its US shale business.

The Permian related distributions are in addition to the distributions of 20-30% of cashflow from operations as per its existing capital allocation framework, it said in a Q4 update statement, ahead of full-year results on February 3.

Integrated gas was the standout performer with production expected to be between 910 and 950 thousand barrels of oil equivalent per day and LNG liquefaction volumes estimated between 7.7 and 8.3 million tonnes.

Trading and optimisation results in Integrated Gas are expected to be "significantly higher compared to the third quarter 2021", overcoming ongoing supply issues and capturing unique optimisation opportunities generated through the large scale and scope of its LNG trading portfolio in the prevailing high LNG spot price environment. Underlying Opex is expected to be between $1.6 and $1.8 billion.

The results come as the UK continues to grapple with an energy crisis which has seen firms close (to read why Bulb had to enter 'special administration', click here) and demand soar due to low winds and cold weather – all coinciding with Europe-wide shortages caused by Russia cutting the gas it supplies to Germany.

Will Webster, OGUK’s Energy Policy Manager said: “Our industry has risen to the challenge admirably, but it shows how the nation depends on a reliable supply of gas. The UK’s offshore industry still supplies about half the gas needed by the nation and that gives us extra energy security compared with many other nations. 

“There is currently no technology that can substitute for gas and provide us with the energy needed to generate electricity and heat our homes, so it is vital for the UK to maintain its own supplies and to invest in new technologies like carbon capture and storage.” 

With Upstream, Shell's production is expected to be between 2,150 and 2,250 thousand barrels of oil equivalent per day, with underlying Opex between $2.7 and $3 billion.

Refinery utilisation is expected to be between 69% and 73%, in line with the third quarter 2021. However, the realised refining margins are expected to be adversely impacted by the extended turnaround in Scotford and Hurricane Ida recovery efforts in Norco.

Chemicals margins, as well as associated JV earnings, are expected to be significantly lower than Q3 2021, primarily due to weaker base chemicals margins. Shell Gibraltar's LNG terminal is pictured.

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