Shell first quarter 2022 update note
This update note follows the 2021 segmentation to enable comparison with the fourth quarter 2021 results. From the first quarter results publication onwards we will align our reporting segments with our Powering Progress strategy and provide additional transparency in our Growth pillar. The Renewables & Energy Solutions business will be reported separately from Integrated Gas. Oil Products and Chemicals will be reorganised into two segments – Marketing and Chemicals & Products. The Shales assets in Canada will be reported as part of the Integrated Gas segment instead of the Upstream segment. There is no impact on a Shell Group level.
For the first quarter 2022 results, the post-tax impact from impairment of non-current assets and additional charges (e.g. write-downs of receivable, expected credit losses, and onerous contracts) relating to Russia activities are expected to be $4 to $5 billion. These charges are expected to be identified and therefore will not impact Adjusted Earnings. Details of the accounting treatment and impact of ongoing developments will be provided at the first quarter 2022 results announcement.
Integrated Gas (including Renewables and Energy Solutions)
Adjusted EBITDA
- Production is expected to be between 860 and 910 thousand barrels of oil equivalent per day (kboe/d) driven by maintenance activities, including the planned turnaround of one of the trains at Pearl GTL. The outlook includes ~ 50 kboe/d for the Canadian Shales assets.
- LNG liquefaction volumes are expected to be between 7.7 and 8.3 million tonnes.
- Trading and optimisation results for Integrated Gas (including Renewables and Energy Solutions) are expected to be higher compared to the fourth quarter 2021.
- Underlying Opex, for Integrated Gas (including Renewables and Energy Solutions) is expected to be between $1.7 and $1.9 billion.
Adjusted Earnings
- Pre-tax depreciation is expected to be between $1.2 and $1.4 billion.
- Taxation charge is expected to be between $700 and $1,100 million.
- Renewables and Energy Solutions segment results, which until now have been included in the Integrated Gas results, will be separately disclosed from the first quarter 2022 results announcement. Of the total Integrated Gas (including Renewables and Energy Solutions) Adjusted Earnings, Renewables and Energy Solutions contribution is expected to be between $100 and $600 million.
Upstream
Adjusted EBITDA
- Production is expected to be between 1,900 and 2,050 thousand barrels of oil equivalent per day. The outlook reflects a reduction of ~50 kboe/d related to the transfer of Canada Shales assets to Integrated Gas.
- Underlying Opex is expected to be between $2.3 and $2.7 billion.
Adjusted Earnings
- Pre-tax depreciation is expected to be between $2.8 and $3.1 billion.
- Taxation charge is expected to be between $2.8 and $3.3 billion.
Oil Products
Adjusted EBITDA
Marketing
- Marketing results are expected to be in line with the fourth quarter 2021.
- Underlying Opex is expected to be between $1.8 and $2.0 billion.
- Sales volumes are expected to be between 2,200 and 2,600 thousand barrels per day.
Products (Refining & Trading)
- Trading & Optimisation results are expected to be significantly higher than the fourth quarter 2021.
- The indicative refining margin is around $10.23/bbl, compared to $6.55/bbl in the fourth quarter 2021.
- Refinery utilisation is expected to be between 70% and 74%, better than the fourth quarter 2021 due to lower turnaround events.
- Underlying Opex is expected to be between $1.6 and $2.0 billion.
- Sales volumes are expected to be between 1,500 and 2,300 thousand barrels per day.
Adjusted Earnings
- Pre-tax depreciation is expected to be between $700 and $900 million of which approximately 50% for Marketing and 50% for Refining & Trading.
- Taxation charge is expected to be between $400 and $700 million of which approximately 20-30% for Marketing and 70-80% for Refining & Trading.
- As part of the ongoing re-segmentation efforts, the pipeline business is being transferred from Marketing to the Refining & Trading sub-segment as of the first quarter 2022.The pipelines business had earnings of approximately $150 million in the fourth quarter 2021. There is no impact on overall Oil Products Adjusted Earnings.
Chemicals
Adjusted EBITDA
- Chemicals margins are expected to be in line with the fourth quarter 2021 due to weaker unit margins from higher feedstock and utility costs offset by higher utilisation.
- Chemical sales volumes are expected to be between 3,100 and 3,600 thousand tonnes.
- Chemicals manufacturing plant utilisation is expected to be between 78% and 82%, better than the fourth quarter 2021 due to lower turnaround events.
- Underlying Opex is expected to be between $800 and $1,000 million.
Adjusted Earnings
- Pre-tax depreciation is expected to be between $250 and $300 million.
- Taxation charge is expected to be a credit of up to $100 million.
- Adjusted Earnings are expected to be in line with fourth quarter 2021 due to higher feedstock and utility costs offset by higher utilisation.
Corporate
- Corporate segment Adjusted Earnings are expected to be a net expense of $450 to $650 million for the fourth quarter. This excludes the impact of currency exchange rate effects.
Shell Group
CFFO
- Tax paid is expected to be between $1.8 and $2.3 billion.
- CFFO is expected to be negatively impacted by very significant working capital outflows as price increases impacting inventory have led to a cash outflow of around $7 billion. Reflecting the unprecedented volatility in commodity prices prevailing up to the end of the quarter, material additional movements could be seen in CFFO from margining effects on derivatives, changes in inventory volumes and in accounts payable and receivables.
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