Quarter Analysis

Income attributable to Shell plc shareholders, compared with the second quarter 2023, mainly reflected higher refining margins, higher realised oil prices, higher LNG trading and optimisation results, and higher Upstream production, partly offset by lower Integrated Gas volumes.

Third quarter 2023 income attributable to Shell plc shareholders also included impairment charges, largely offset by favourable movements due to the fair value accounting of commodity derivatives. These charges and favourable movements are included in identified items amounting to a net loss of $0.1 billion in the quarter.

This compares with identified items in the second quarter 2023 which amounted to a net loss of $1.6 billion and mainly related to net impairment charges and reversals of $1.7 billion. Adjusted Earnings and Adjusted EBITDA2 were driven by the same factors as income attributable to Shell plc shareholders and adjusted for the above identified items and the cost of supplies adjustment of negative $1.0 billion.

 Cash flow from operating activities for the third quarter 2023 was $12.3 billion, and primarily driven by Adjusted EBITDA, and a working capital inflow of $0.4 billion, partly offset by tax payments of $3.2 billion, and derivatives of $2.5 billion. The working capital inflow mainly reflected accounts receivable and payable movements, partly offset by inventory movements due to higher prices and higher volumes.

 Cash flow from investing activities for the quarter was an outflow of $4.8 billion, and included cash capital expenditure of $5.6 billion, and divestment proceeds of $0.3 billion. Net debt and Gearing: At the end of the third quarter 2023, net debt was $40.5 billion, compared with $40.3 billion at the end of the second quarter 2023. Gearing was 17.3% at the end of the third quarter 2023 and in line with the end of the second quarter 2023.

Nine Months Analysis

1 Income attributable to Shell plc shareholders, compared with the first nine months 2022, reflected lower realised oil and gas prices, lower volumes, and lower refining margins, partly offset by higher Marketing margins, and higher LNG trading and optimisation results.

First nine months 2023 income attributable to Shell plc shareholders also included net impairment charges and reversals of $2.3 billion which are included in identified items amounting to a net loss of $2.2 billion. This compares with identified items in the first nine months 2022 which amounted to a net loss of $0.3 billion.

 Adjusted Earnings and Adjusted EBITDA2 for the first nine months 2023 were driven by the same factors as income attributable to Shell plc shareholders and adjusted for identified items and the cost of supplies adjustment of negative $0.2 billion.

Cash flow from operating activities for the first nine months 2023 was $41.6 billion, and primarily driven by Adjusted EBITDA, and working capital inflow of $4.5 billion, partly offset by tax payments of $10.1 billion, and derivatives of $5.1 billion.

 The Cash flow from investing activities for the first nine months 2023 was an outflow of $12.1 billion and included cash capital expenditure of $17.3 billion, divestment proceeds of $2.5 billion, and net other investing cash inflows of $1.2 billion.

Integrated Gas

In October 2023, we completed the previously announced sale of our participating interest of 35% in Indonesia’s Masela production-sharing contract to Indonesia’s PT Pertamina Hulu Energi and PETRONAS Masela Sdn. Bhd. The participating interest includes the Abadi gas project.

 In October 2023, we and our partners in the Oman LNG LLC venture signed an amended shareholders’ agreement for Oman LNG LLC (Oman LNG) extending the business beyond 2024. We will remain the largest private shareholder in Oman LNG, with a 30% shareholding.

Total oil and gas production, compared with the first nine months 2022, increased by 3% mainly due to lower maintenance in Pearl GTL, Trinidad and Tobago, and ramp-up of new fields in Oman and Canada, partly offset by derecognition of Sakhalin-related volumes, and production-sharing contract effects in Pearl GTL. LNG liquefaction volumes decreased by 7% mainly due to the derecognition of Sakhalin-related volumes.

Upstream

 In August 2023, we announced that gas production has started at the Timi platform in Malaysia under the SK318 production-sharing contract (Shell interest 75%)

.Total oil and gas production, compared with the second quarter 2023, decreased by 9% mainly due to higher planned maintenance at Prelude, in Trinidad and Tobago and production-sharing contract effects in Pearl GTL. LNG liquefaction volumes decreased by 4% mainly due to higher maintenance at Prelude. Total production, compared with the second quarter 2023, increased mainly due to higher performance in Deep Water.

Integrated Gas includes liquefied natural gas (LNG), conversion of natural gas into gas-to-liquids (GTL) fuels and other products. It includes natural gas and liquids exploration and extraction, and the operation of the upstream and midstream infrastructure necessary to deliver these to market. Integrated Gas also includes the marketing, trading and optimisation of LNG, including LNG as a fuel for heavy-duty vehicles.

OUTLOOK FOR THE FOURTH QUARTER 2023

Cash capital expenditure for full year 2023 is expected to be within ~$23 – $25 billion. Integrated Gas production is expected to be approximately 870 – 930 thousand boe/d. LNG liquefaction volumes are expected to be approximately 6.7 – 7.3 million tonnes. Outlook reflects ongoing maintenance at Prelude and lower expected liquefaction volumes from Egypt.

 Upstream production is expected to be approximately 1,750 – 1,950 thousand boe/d. Production outlook reflects the closure of the Groningen gas field. Marketing sales volumes are expected to be approximately 2,250 – 2,750 thousand b/d. Refinery utilisation is expected to be approximately 75% – 83%, due to planned maintenance activities in North America. Chemicals manufacturing plant utilisation is expected to be approximately 62% – 70%.

Corporate Adjusted Earnings are expected to be a net expense of approximately $550 – $750 million in the fourth quarter 2023 and a net expense of approximately $2,750 – $2,950 million for the full year 2023. This excludes the impact of currency exchange rate and fair value accounting effects.

Shell Plc Chief Executive Officer, Wael Sawan, commented:

“Shell delivered another quarter of strong operational and financial performance, capturing opportunities in volatile commodity markets. We continue to simplify our portfolio while delivering more value with less emissions.

Shell is commencing a $3.5 billion buyback programme for the next three months, bringing the buybacks for the second half of 2023 to $6.5 billion, well in excess of the $5 billion announced at Capital Markets Day in June. This takes total announced shareholder distributions for 2023 to ~$23 billion.”