Shell stung by weak refining, gas trading in Q3 results

Shell warned on October 6 that its third-quarter profits would be undermined by a near halving of oil refining margins, a collapse in chemical margins and weaker natural gas trading performance.

Coming off of two consecutive quarters of record profit in the first half of this year on the back of high oil and gas prices, the company said in an update that its indicative refining margins had slumped to $15/barrel from $28/barrel in the previous three months. Indicative margins reversed to negative $27/metric ton, from positive $86/mt in the second quarter. Shell expects to take a $1.0-1.4bn hit in EBITDA as a result of the drop in these margins.

Meanwhile, Shell warned that its third-quarter LNG and gas trading results were set to be "significantly lower" because of a seasonal drop in demand and "substantial differences between paper and physical realisation in a volatile and dislocated market."

Cash generation will also suffer as a result of $2.5bn in working capital outlook by the end of August, because of significant oil and gas price volatility recently. The UK major will reveal its third-quarter results in full on October 27.

At its integrated gas segment, Shell expects to produce 890,000-940,000 barrels of oil equivalent/day and deliver 6.9-7.5mn mt of LNG in the three-month period. At its upstream business, it expects to produce 1.75-1.85mn boe/d.