Shell's first-quarter profits are almost halved but gas division is helped by solid LNG sales

Thursday, 30 April 2020
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Royal Dutch Shell reported that first-quarter profits had almost halved from a year ago, but the natural gas and LNG division still managed to maintain stable earnings as sales increased.

Shell said first-quarter LNG sales rose 9 percent to 19 million tonnes from 17.51MT in the same three months of 2019, though were down from the 20.09MT sold in the final quarter of 2019.

Shell’s overall quarterly earnings dropped by 48 percent to $2.75 billion from $5.29Bln in the same three months of 2019, reflecting lower realised oil, gas and LNG prices, weaker realised refining and chemicals margins as well as lower sales volumes.

Earnings from Integrated Gas, one of four production divisions at Shell and including LNG, came to $2.14Bln compared with $2.56Bln in the year-ago quarter.

“Our Integrated Gas and Marketing businesses continued to achieve robust results this quarter, bringing resilience to our cash flows,” said Shell Chief Executive Ben van Beurden.

Shell noted that during the quarter Integrated Gas announced that it would not proceed with the proposed US Lake Charles LNG project with Energy Transfer of the US due to the current market conditions.

After the quarter, in April, Shell took the final investment decision to develop the first phase of Arrow Energy’s Surat Gas Project in Queensland, Australia, which will bring up to 90 billion cubic feet per year of new gas to market at peak production.

Shell said that compared with the first quarter last year, gas earnings, excluding identified items, primarily reflected lower realised LNG, oil and gas prices as well as lower contributions from trading and optimisation.

“Total gas production increased by 12 percent, mainly due to lower maintenance activities and field ramp-ups in Trinidad and Tobago and Australia,” said the company.

“LNG liquefaction volumes increased mainly as a result of lower maintenance activities and new LNG capacity, partly offset by lower feed-gas availability compared with the first quarter 2019,” it added.

In its outlook for the second quarter, Shell said that due to demand or regulatory requirements and/or constraints in infrastructure, the company may need to take measures to curtail or reduce oil and gas production, LNG liquefaction as well as the utilisation of refining and chemicals plants.

In the second quarter, Shell said Integrated Gas production is expected to be approximately 840-890 thousand barrels of oil equivalent per day.

LNG liquefaction volumes are expected to be approximately 7.4-8.2 million tonnes.

More than 90 percent of the term contracts for Shell’s LNG sales are oil price-linked with a price lag of typically three to six months.

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