Shell (SHEL) Beats Q4 Earnings on Higher Price, LNG Sales
Europe’s largest oil company Shell plc SHEL reported fourth-quarter earnings per ADS (on a current cost of supplies basis, excluding items — the market’s preferred measure) of $2.76. The bottom line came in well above the Zacks Consensus Estimate of $2.10 and surged from the year-earlier quarter’s earnings of $1.66 per ADS, backed by stronger commodity prices, higher LNG volumes and refining margins.
Shell’s revenues of $101.2 billion were up from fourth-quarter 2021 sales of $90.2 billion.
Meanwhile, Shell repurchased $4.5 billion of shares in the fourth quarter. The energy group also informed that it completed the $4 billion buyback program announced during the third quarter earnings release. Moreover, SHEL expects another $4 billion worth of repurchases for the first quarter. As promised, the oil major increased its dividend by 15%.
Shell PLC Unsponsored ADR Price, Consensus and EPS Surprise
Shell PLC Unsponsored ADR price-consensus-eps-surprise-chart | Shell PLC Unsponsored ADR Quote
Inside Shell’s Segments
Upstream: The segment recorded a profit of $3.1 billion (excluding items) during the quarter, up from $2.8 billion (adjusted) in the year-ago period. This primarily reflects the impact of higher oil and gas prices, partly offset by lower volumes.
At $82.42 per barrel, the group’s worldwide realized liquids prices were 12.1% above the year-earlier levels, while natural gas prices improved 37.6%.
Shell’s upstream volumes averaged 1,859 thousand oil-equivalent barrels per day (MBOE/d), down 11.9% from the year-ago period, mainly due to the loss of contribution due to the company’s asset sales, to go with maintenance downtime. Liquids production totaled 1,331 thousand barrels per day (down 8.6% year over year) and natural gas output came in at 3,067 million standard cubic feet per day (down 19.3%).
Chemicals and Products: In this segment, the London-based super-major reported an adjusted income of $744 million, turning around from a loss of $130 million in the year-ago period. The highly favorable comparison was due to strong refining margins and favorable deferred tax movements, which more than offset high depreciation charges and weakness in trading and optimisation. Meanwhile, refinery utilization came in at 90%, jumping from 68% during the December-end quarter of 2021.
Integrated Gas: The unit reported an adjusted income of $6 billion, surging from $4 billion in the October-December quarter of 2021. Results were primarily impacted by higher LNG sales volumes, which edged up 0.6% from the third quarter of 2021 to 16.82 million tons. However, total Integrated Gas production fell 6.2% year over year to 917 MBOE/d.
Marketing: The segment recorded an income of $446 million (excluding items) during the quarter compared to the year-ago earnings of $611 million due to a dip in margins.
Renewables and Energy Solutions: The segment logged an adjusted income of $293 million, skyrocketing around from the year-ago profit of just $43 million. The performance boost reflects higher trading and optimization margins for gas and power in Europe. Moreover, external power sales were up 11.9% year over year to 66 terawatt hours, though piped gas sales fell 3.2% to 241 terawatt hours.
As of Dec 31, 2022, the Zacks Rank #3 (Hold) company had $40.2 billion in cash and $83.8 billion in debt (including short-term debt). Net debt-to-capitalization was approximately 18.9%, down from 23.1% a year ago.
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During the quarter under review, Shell generated cash flow from operations of $22.4 billion, returned $1.8 billion to its shareholders through dividends and spent $6.4 billion on capital projects.
The company’s cash flow from operations almost tripled from the year-earlier level. Meanwhile, the group raked in $15.5 billion in free cash flow during the fourth quarter compared to $10.7 billion a year ago.
Shell expects first-quarter 2023 upstream volumes of 1,750-1,950 MBOE/d, while Integrated Gas production is expected between 910 MBOE/d and 970 MBOE/d. The company also foresees marketing sales volumes of 2,150-2,650 thousand barrels per day and refinery utilization in the range of 87-95% was also guided.
Important Energy Releases So Far
Let’s take a look at some key energy releases so far.
SLB SLB, the largest oilfield contractor, announced fourth-quarter 2022 earnings of 71 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 69 cents. SLB recorded total revenues of $7.9 billion, outpacing the Zacks Consensus Estimate by 0.7%.
SLB’s strong quarterly earnings resulted from strong activities in land and offshore resources in North America and Latin America. The company’s board approved a quarterly cash dividend of 25 cents per share, indicating a 43% increase from the last paid dividend.
US energy powerhouse Chevron CVX reported fourth-quarter earnings per share of $4.09, missing the Zacks Consensus Estimate of $4.16. The underperformance could be attributed to lower-than-expected bottom line in both the company’s segments. CVX’s upstream segment profit of $5.5 billion came 19.8% below the consensus mark, while the downstream business missed the Zacks Consensus Estimate by 3.4%.
The company recorded $12.5 billion in cash flow from operations, compared to $9.5 billion a year ago. The increasing cash flow could be attributed to strong price realizations in the upstream business. Importantly, Chevron’s free cash flow for the quarter was $8.7 billion. Further, Chevron paid $2.7 billion in dividends and bought back $3.8 billion worth of its shares.
Refining giant Marathon Petroleum MPC reported adjusted earnings per share of $6.65, which comfortably beat the Zacks Consensus Estimate of $5.54 and compared with a profit of merely $1.30 per share in the year-ago period. MPC’s bottom line was favorably impacted by the stronger-than-expected performance of its key Refining & Marketing segment. Operating income of the segment totaled $3.9 billion, ahead of its Zacks Consensus Estimate by 38%.
In the reported quarter, Marathon Petroleum spent $849 million on capital programs (59% on Refining & Marketing and 35% on the Midstream segment) compared to $651 million in the year-ago period. As of Dec 31, MPC had cash and cash equivalents of $8.6 billion and total debt, including that of MPLX, of $26.7 billion, with a debt-to-capitalization of 43.9%.
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