Shell Cuts Gas Output Guidance on Unplanned Maintenance

(Bloomberg) -- Shell Plc sees lower natural gas production and LNG volumes in the first quarter of 2025 than previously expected, citing unplanned maintenance in Australia and adverse weather.

In a trading update published on Monday, London-based Shell said it expects integrated gas production of 910,000 to 950,000 barrels of oil equivalent. Though that was an improvement on the fourth quarter of last year, it was lower than the range flagged in the last quarterly report.

On a more upbeat note, oil production is set to be slightly higher than planned, refining margins rose from the previous quarter, and the company signaled a strong quarter for oil trading.

Shell Chief Executive Officer Wael Sawan has been struggling to close a valuation gap with US rivals, after cutting costs, refocusing on oil and gas while paring back on underperforming clean energy businesses, and boosting returns to shareholders. The company announced last month it would return 40% to 50% of cash flow to investors, up from a previous range of 30% to 40%.

Shell’s update on Monday was focused on the first three months of the year, which means it doesn’t reflect the global volatility that exploded across markets last week when US President Donald Trump unveiled his swath of tariffs, sparking major selloffs in equity and commodities markets and provoking retaliatory measures from China.

Oil prices were particularly hard hit, plunging to a four-year low after an initial rout in response to the tariff announcement was compounded by a surprise boost in supply by OPEC+. Global benchmark Brent continued to decline Monday. Shell’s shares retreated more than 11% last week amid the wider sell-off, and fell sharply again at the open in London.

In its update, Shell said integrated gas production was “impacted by unplanned maintenance, including in Australia,” with LNG volumes reflecting “weather impact (cyclones) and unplanned maintenance in Australia.” In the last quarterly report, production had been seen in a range of 930,000 to 990,000 barrels of oil equivalent. 

The top LNG trader sees liquefaction volumes at 6.4 million to 6.8 million tons in the period, against a previous forecast for 6.6 million to 7.2 million tons.

For oil, the company sees upstream output of 1.79 million to 1.89 million barrels equivalent a day against a previous expectation for 1.75 million to 1.95 million. Shell flagged an indicative refining margin of $6.2 a barrel, up from $5.5 a barrel in the previous quarter.

Oil Trading

Shell signaled a strong start to the year for oil trading, rebounding from a weaker performance in the last quarter of 2024. Trading and optimisation “is expected to be significantly higher” than 2024’s last period, and in line with last year’s second and third quarter contributions, the company said.

Shell doesn’t break out separate results for its massive in-house trading business, which includes oil, natural gas and electricity. However, Sawan said at its capital markets day in New York that trading hadn’t lost money during a single quarter over the last decade.

A key part of Sawan’s strategy has been a focus on liquefied natural gas. Shell is already the world’s top trader of LNG and last month outlined plans to expand sales by 4% to 5% annually until 2030.

For gas, trading and optimisation results are expected to be in line with the final quarter of last year, despite a higher, non-cash, impact from expiring hedge contracts compared with the previous quarter.

Larger rival Exxon Mobil Corp. said last week it may report a $2.7 billion sequential gain in quarterly profit as a result of higher oil and natural gas prices, as well as stronger results in refining and trading. 

(Updates with trading outlook from third paragraph, shares in sixth.)

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