Shell cuts capex guidance, says higher Q3 oil and gas output boosts resilience

Shell on Oct. 31 reined in its 2024 capital expenditure guidance to below its earlier indication of $22 billion-$25 billion and pointed to its lowest debt gearing since 2015 as the industry undergoes a period of oil price weakness.

Shell in its Q3 results also confirmed it had achieved higher production compared with Q3 2023, with overall production up nearly 100,000 b/d of oil equivalent at 2.80 million boe/d. Gas accounted for the majority of the increase, with small increases in liquids production in both the Upstream and LNG-focused Integrated Gas Units, of about 10,000 b/d each.

“We’ve delivered another strong set of results despite a less favorable macro environment -- this was driven by strong operational performance across our portfolio, continuing the momentum we’ve built over recent quarters,” Chief Financial Officer Sinead Gorman said. “We’ve further strengthened our balance sheet, leaving us well positioned irrespective of the macro environment.”

In Upstream, the company completed a number of scheduled maintenance shutdowns ahead of schedule, which “paved the way” for higher production, Gorman said in a video message.

Amid a weak downstream environment, trading and optimization earnings had remained “robust,” she said, adding that Shell remained “resilient throughout the cycle.”

The industry has been experiencing significantly lower crude prices compared with 2023. The Platts Dated Brent benchmark in the third quarter was on average 7.4% lower year on year at $80.34/b, with price weakness continuing into the fourth quarter. Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $73.19/b on Oct. 30.

Shell’s own realized oil prices in the Upstream segment averaged $75.07/b in the third quarter, down 5% year on year. Its indicative refining margin was $5.53/b, down 65% year on year.

Stabilizing production

Shell issued broad guidance for Q4 output, suggesting the UK major will manage to stabilize -- or increase -- production in 2024, after several years of decline.

It has said it aims to keep its oil production stable at around 1.4 million b/d through to 2030 and to increase gas output. Third-quarter liquids production across the Upstream and Integrated Gas units was 1.46 million b/d, comprising 1.32 million b/d and 136,000 b/d respectively.

It estimated Q4 oil and gas production in the Upstream unit will be 1.75 million-1.95 million boe/d, compared with 1.87 million boe/d in Q4 2023. Production in the Integrated Gas unit looks likely to rise year on year to a range of 900,000-960,000 boe/d, from 901,000 boe/d in Q4 2023. Shell expects Q4 LNG liquefaction volumes in a range of 6.9 million-7.5 million mt, versus 7.06 million mt in Q4 2023.

Fourth-quarter liquids output will be influenced by scheduled maintenance at the Pearl Gas-to-Liquids plant in Qatar, it said.