Shell reports improved first quarter refining results, notes working capital outflows (NYSE:SHEL)

Shell (NYSE: SHEL) issued a press release on Thursday outlining first-quarter results and detailing the key volume and margin impacts for the quarter. Unlike the Q4 previewThursday’s post took on a relatively optimistic tone:

• Trading – LNG trading expected “to be higher relative to the fourth quarter”, after the fourth quarter was expected to be “significantly higher” than the third quarter results; meanwhile, oil trading is expected “to be significantly higher than fourth quarter results.”
• Refining margin – the company said refining margins were $10.2/bbl in the first quarter, further noting that 2021 margins averaged $4.8/bbl, with a fourth quarter at $6.6/bbl.
• Production – Shell (SHEL) will change segment accounting in 2022, making it difficult to produce at the segment level; however, consolidated production will be approximately 2,860 Mboe/d, broadly in line with the guidance provided alongside the fourth quarter results.
• Cash flow – management said the impact of higher inventory prices resulted in a working capital outflow of $7.0 billion, they also noted that quarter-end pricing may have an impact on outflows.
• Chemicals – Chemicals earnings are expected to be flat sequentially, after the company reported historically weak chemical results in the fourth quarter.

Shell (SHEL) was quick to report bad news in quarter-end press releases. While the Chemicals and Working Capital updates may be worse than expected, the positive trading and refining news should be welcomed. Particularly after the Exxon (XOM) 8K, which indicated lower downstream earnings in the first quarter.