UK-based energy giant Shell (GB:SHEL) announced that its earnings from gas trading are expected to experience a substantial increase in the fourth quarter. However, the Chemicals and Products segment is projected to incur an adjusted earnings loss during the same period. Additionally, the company expects to incur impairment charges ranging from $2.5 billion to $4.5 billion in Q4, mainly due to macro and external factors and portfolio decisions, primarily associated with the Singapore chemicals assets, which it actively seeks to divest.
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The Shell share price reacted negatively to the update and was trading down by around 2% as of writing. The company will release its Q4 2023 results on February 1, 2024.
Shell is an oil and gas company providing a wide range of energy products, including fuels, oil, liquefied petroleum gas (LPG), lubricants, etc.
More from Shell’s Q4 2023 Update
Shell expects to produce gas in the range of 880-920 kboe/d in Q4, which is higher than 900 kboe/d produced in the previous quarter due to seasonality and better optimization. The company’s gas trading division has emerged as a significant revenue driver, particularly after the increased volatility in gas prices following Russia’s invasion of Ukraine.
The company expects its Chemicals and Products segment to be impacted by lower trading volumes and planned maintenance activities in North America. That said, the indicative margin for the segment is expected to increase by $10 to reach $125/ton in the fourth quarter.
RBC analyst Biraj Borkhataria stated the update was “neutral” but noted that weakness in the chemicals business continues to weigh on the company’s earnings. He further added that the update is in line with the generally reduced oil trading results in the fourth quarter due to “lower liquidity and volatility.”
Last week, Borkhataria reiterated his Buy rating on SHEL stock, predicting an upside of 19%.
Is Shell Stock a Good Buy Now?
Overall, analysts hold a bullish stance on SHEL stock, as reflected in the Strong Buy consensus rating on TipRanks. This is based on 12 Buy and three Hold recommendations. At an average target price of 3,109.94p, analysts are forecasting an increase of around 23% on the current price.
