British energy giant Shellslashed its integrated gas production expectations for the first quarter of the year, linked to adverse weather such as cyclones and unplanned maintenance in Australia.
It now expects gas production in the first three months of the year to be somewhere between 910,000 barrels and 950,000 barrels of oil equivalent per day, compared to an earlier estimate of between 930,000 barrels and 990,000 barrels.
However, this new guidance is still a rise from the 905,000 barrels of output in the fourth quarter of last year.
Shell’s share price dropped 4.7% on the London Stock Exchange on Monday afternoon.
Due to the above factors, Shell also estimated that liquefied natural gas (LNG) volumes will fall for the first quarter of the year.
The company now expects output to be somewhere between 6.4 million and 6.8mn metric tons, down from a previous estimate of between 6.6 million and 7.2m metric tons.
Upstream production, which involves the extraction of natural gas and crude oil, is likely to be between 1.79m and 1.89m oil-equivalent barrels per day. This is compared to a previous forecast of between 1.75m to 1.95m oil-equivalent barrels a day.
“One of Shell’s key strengths is its dominant position in natural gas, so it will disappoint shareholders that this part of the business is not firing on all cylinders,” said Russ Mould, investment director at AJ Bell.
“Under chief executive Wael Sawan the company has been looking to up its game to catch up with its US peers and Shell has done better at keeping pace than its UK-listed peer BP. Sawan has focused on stripping out costs, keeping a lid on spending and reducing net debt. He also scaled back green investments and insisted that anything in this arena had to stand up as a viable investment on its own merits,” he added.
The company is expected to report its full first-quarter results on 2 May.
Shell continues to focus on oil and gas business
Back in March, Shell had shared an updated strategy which focused more strongly on its oil and gas businesses. The company also revealed plans to grow its shareholder returns over the next half decade, while cutting back on excess costs. The move comes as the company attempts to maintain profitability, and has been welcomed by shareholders.
“We want to become the world’s leading integrated gas and LNG business and the most customer-focused energy marketer and trader, while sustaining a material level of liquids production. Today we are raising the bar across our key financial targets, investing where we have competitive strengths and delivering more for our shareholders,” Wael Sawan, CEO of Shell, said in a press release.
Rival British oil and gas company, BP, has also recently lowered its spending on renewable energy, while ramping up its oil and gas spending. This has been driven by increasing investor pressure, especially from activist investors such as Elliott Management, which have been calling on BP to boost shareholder returns, much to the dismay of climate activists.
