Core Insights - Shell plc reported a significant decline in income attributable to shareholders, with Q2 2025 income at $3.6 billion, down 25% from Q1 2025 and 23% from H1 2024 [1][2][8] - Adjusted Earnings and Adjusted EBITDA also saw declines of 24% and 30% respectively compared to the previous quarter and 13% and 20% compared to the same period last year [1][8] - Cash flow from operating activities increased by 29% in Q2 2025 compared to Q1 2025, reaching $11.9 billion, primarily driven by Adjusted EBITDA [1][5][12] Financial Performance - Income attributable to Shell plc shareholders for Q2 2025 was $3.6 billion, down from $4.8 billion in Q1 2025 and $3.5 billion in Q2 2024 [1] - Adjusted Earnings for Q2 2025 were $4.3 billion, a decrease of 24% from Q1 2025 and 30% from H1 2024 [1][8] - Adjusted EBITDA for Q2 2025 was $13.3 billion, down 13% from Q1 2025 and 20% from H1 2024 [1][8] Cash Flow and Capital Expenditure - Cash flow from operating activities for Q2 2025 was $11.9 billion, offset by tax payments of $3.4 billion [5][12] - Cash flow from investing activities was an outflow of $5.4 billion, including cash capital expenditure of $5.8 billion [5][13] - Free cash flow for Q2 2025 was $6.5 billion, with total shareholder distributions amounting to $5.7 billion [1][7][12] Debt and Gearing - At the end of Q2 2025, net debt increased to $43.2 billion from $41.5 billion at the end of Q1 2025, resulting in a gearing ratio of 19.1% [1][6] - Total debt remained stable at $75.7 billion [1][6] Segment Performance Integrated Gas - Income for Q2 2025 was $1.8 billion, down 34% from Q1 2025 [22] - Adjusted Earnings decreased by 30% to $1.7 billion compared to Q1 2025 [22][23] - Cash flow from operating activities was $3.6 billion, reflecting a decrease in production [22][26] Upstream - Income for Q2 2025 was $2.0 billion, a slight decrease of 3% from Q1 2025 [35] - Adjusted Earnings fell by 26% to $1.7 billion compared to Q1 2025 [35][38] - Cash flow from operating activities increased significantly to $6.5 billion, up 65% from Q1 2025 [35][40] Marketing - Income for Q2 2025 was $766 million, down 6% from Q1 2025 [47] - Adjusted Earnings increased by 33% to $1.2 billion compared to Q1 2025 [47][49] - Cash flow from operating activities was $2.7 billion, reflecting a 43% increase from Q1 2025 [47][51] Chemicals and Products - Income for Q2 2025 was a loss of $174 million, compared to a loss of $77 million in Q1 2025 [58] - Adjusted Earnings were $118 million, down 74% from Q1 2025 [58][61] - Cash flow from operating activities was $1.4 billion, reflecting a significant increase from Q1 2025 [58][64] Renewables and Energy Solutions - Income for Q2 2025 was a loss of $254 million, slightly worse than the loss of $247 million in Q1 2025 [74] - Adjusted Earnings were negative at $9 million, an improvement from the loss of $42 million in Q1 2025 [74][77] - Cash flow from operating activities was $1 million, a significant decrease from $367 million in Q1 2025 [74][80] Outlook - Shell expects cash capital expenditure for the full year 2025 to be within $20 - $22 billion [94] - Integrated Gas production is projected to be approximately 910 - 970 thousand boe/d, while Upstream production is expected to be around 1,700 - 1,900 thousand boe/d [95][96]

Group 1 - Walmart has been ranked as the largest company in the world for the twelfth consecutive year, followed by Amazon and China's State Grid Corporation [1] - The total revenue of the Fortune Global 500 companies for 2024 is approximately $41.7 trillion, which is over one-third of the global GDP, reflecting a year-on-year growth of about 1.8% [1] - The threshold for inclusion in the list has increased from $32.1 billion to $32.2 billion [1] Group 2 - China has 130 companies on the list, a decrease of three from the previous year, with a total revenue of $10.7 trillion, down 3% year-on-year [1] - The energy and chemical sector in China has 21 companies listed, with notable rankings including China National Petroleum Corporation at 5th and China Petroleum & Chemical Corporation at 6th [1] Group 3 - The global oil and chemical industry has 49 companies on the list, with 9 in the chemicals sector, marking a decline of 2 companies from the previous year [2][3] - Saudi Aramco remains the most profitable company with a profit of approximately $105 billion, despite a year-on-year decline of about 13% [4] - Major oil and gas companies such as ExxonMobil, China National Petroleum, Chevron, Shell, and TotalEnergies are among the top 50 most profitable companies [4]

Core Viewpoint - International Shell Research Limited has applied for a patent for a fuel composition that includes a significant proportion of renewable components, indicating a shift towards more sustainable fuel solutions in the energy sector [1] Group 1: Patent Details - The patent application, titled "Fuel Composition," was published under CN120390788A and was filed on December 2023 [1] - The fuel composition consists of at least 30 volume% of renewable gasoline components derived from ethanol-to-gasoline processes, which must have a Research Octane Number (RON) of at least 80 [1] - It also includes at least 5 volume% of renewable alcohol components and 15 to 50 volume% of petroleum-derived gasoline components, achieving a RON of 95 or greater with at least 50 volume% of renewable components [1] Group 2: Environmental Impact - The proposed fuel composition allows for a higher bio-content in fuel formulations while maintaining high RON, improved distillation characteristics, and low particulate emissions [1]

Core Viewpoint - Shell plc (SHEL) is expected to report second-quarter results on July 31, with earnings estimated at $1.13 per share and revenues of $73.7 billion, reflecting a significant year-over-year decline in earnings and a slight decrease in revenues [1][3]. Group 1: Q1 Performance and Historical Context - In the previous quarter, Shell reported earnings of $1.84 per ADS, surpassing the Zacks Consensus Estimate of $1.54, but revenues of $70.2 billion fell short by over 12% due to lower LNG sales [2]. - Shell has beaten the Zacks Consensus Estimate for earnings in three of the last four quarters, with an average earnings surprise of 1.7% [3]. Group 2: Factors Influencing Q2 Results - Shell's Integrated Gas division is expected to produce between 900,000 and 940,000 barrels of oil equivalent per day, a decrease from the previous quarter's 927,000 [4][8]. - LNG output is projected to be between 6.4 million and 6.8 million tons, with weaker gas trading results anticipated compared to Q1 [4]. - Traditional drilling production is expected to decline to 1.66-1.76 million barrels of oil equivalent per day due to maintenance and asset sales [4]. Group 3: Refining and Chemicals Outlook - Refining margins have improved, rising from $6.20 per barrel in Q1 to $8.90 per barrel in Q2, supported by better refinery utilization [5][8]. - The chemicals segment is expected to report a loss due to unplanned shutdowns at the Monaca plant, impacting overall quarterly results [5][8]. - The renewables and energy solutions segment's performance is projected to range from a $400 million loss to a $200 million profit [5]. Group 4: Earnings Prediction and Model Insights - The Zacks model indicates uncertainty in Shell's ability to beat earnings estimates for Q2, with an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are at $1.13 per share [6][7][9]. - Shell currently holds a Zacks Rank 3, which does not enhance the predictive power of the Earnings ESP due to the 0.00% figure [9].

Industry Overview - The crude oil pricing environment is expected to experience significant volatility, negatively impacting exploration and production activities of integrated energy companies [1] - The Zacks Oil and Gas Integrated International industry includes companies involved in upstream, midstream, and downstream operations across various global regions [3] - Integrated players are gradually focusing on renewables to lower emissions and cut carbon intensity of products sold [4] Current Challenges - The integrated energy sector is navigating a highly uncertain macroeconomic environment, with refining, renewable energy, and chemical segments under pressure due to limited market visibility [5] - A slowdown in oil production growth in the U.S. is driven by shareholder demands for capital returns rather than production expansion, leading to reduced revenues [6] - Growing demand for renewable energy is expected to decrease reliance on oil and natural gas, adversely impacting integrated energy firms primarily engaged in fossil fuel production [7] Industry Performance - The Zacks Oil and Gas Integrated International industry ranks 189, placing it in the bottom 23% of the 245 Zacks industries, indicating bleak near-term prospects [8][9] - The industry has underperformed the broader Zacks Oil - Energy sector and the S&P 500, declining 5.4% over the past year compared to the S&P 500's growth of 17.3% [10] Valuation Metrics - The industry is currently trading at a trailing 12-month EV/EBITDA ratio of 4.27X, lower than the S&P 500's 17.85X and the sector's 4.77X [13] - Over the past five years, the industry has traded between 2.75X and 6.54X, with a median of 4.11X [14] Key Companies - Chevron completed a $53 billion acquisition of Hess Corporation, enhancing its upstream portfolio and gaining a 30% interest in the Stabroek Block offshore Guyana, which holds over 11 billion barrels of recoverable oil [17] - ExxonMobil's acquisition of Pioneer Natural Resources expanded its production capabilities in the Permian Basin, allowing it to maintain low production costs and a robust project pipeline in offshore Guyana [21] - Shell's acquisition of Pavilion Energy strengthens its LNG trading capabilities, targeting a 4-5% annual increase in LNG sales over the next five years [23]

Core Insights - Chevron Corporation and Shell plc are major players in the Gulf of America, contributing significantly to U.S. crude oil production and focusing on sustainability [1][2] - The deepwater oil and gas sector is evolving with advanced technology and a strong emphasis on emission reduction, attracting investor interest [2] Chevron Overview - Chevron is enhancing its operations in the Gulf of America with new projects like Ballymore and Whale, aiming for a production increase to 300,000 net barrels of oil equivalent per day by 2026, a 50% rise from 2020 levels [3][7] - The company is leveraging its offshore experience and energy-efficient designs, with the Anchor platform tapping into high-pressure reserves and older facilities like Tahiti benefiting from updated models [3][4] - Chevron's strategy includes using simpler designs and pre-made sections to reduce development time and costs, while also minimizing pollution [4] Shell Overview - Shell is a leader in deepwater drilling, with a history of successful operations in the Gulf of America, and is known for its engineering capabilities and cost control [5][8] - The company employs standardized designs and robotics to enhance efficiency, achieving a 50% faster engineering process and a 75% reduction in manufacturing errors [6] - Shell has reduced methane emissions in the Gulf of America by 40% since 2016, surpassing its 2023 emissions target by 5% [6] Financial Performance - Over the past year, Shell's stock has remained stable, with a slight decline of 0.1%, while Chevron's stock has decreased by 3.3%, suggesting potential undervaluation for Chevron [9] - Chevron trades at a premium with a forward earnings multiple of 18.26, compared to Shell's 11.29, reflecting expectations of better profit margins from its Gulf projects [11] - Earnings projections indicate a 27% drop in Chevron's EPS for 2025, followed by a 23% rebound in 2026, while Shell's EPS is expected to fall by 20% in 2025 with a slower recovery of 10% in 2026 [12][15] Conclusion - Both Chevron and Shell are positioned strongly in the Gulf of America, with Chevron focusing on production growth and profit margins, while Shell excels in innovation and project replication [17][18] - Currently, Chevron appears to have a slight edge due to its clear production targets and projected earnings rebound, making both companies attractive options for investors seeking exposure to the offshore oil sector [18]

Core Viewpoint - Geopolitical factors have led to significant volatility in oil prices, resulting in the expectation that major oil companies will report their lowest quarterly profits in four years [1] Group 1: Oil Price Volatility - Oil prices surged by 31% over a seven-week period from May to June, but ultimately fell by 10% by the end of the quarter due to the impact of President Trump's trade war and OPEC+ production increases [1] - The volatility has caused a divergence in performance between Shell and BP, with Shell warning of a "significant decline" in trading profits while BP anticipates "strong" profits from its oil trading business [1][4] Group 2: Earnings Forecasts - Analysts predict that the combined earnings of ExxonMobil, Chevron, Shell, TotalEnergies, and BP will decline by 12% quarter-on-quarter to $19.88 billion [1][4] - The average oil price for the quarter is expected to be below $70 per barrel, complicating the ability of global energy giants to maintain shareholder returns [4] Group 3: Company-Specific Insights - Shell's trading department, typically a reliable profit source, underperformed, leading to a decline in European oil stocks, although Shell's stock rose by approximately 10% this year [7] - BP is under pressure from activist investors and has appointed a new chairman, focusing on its core oil and gas business to improve its performance [7] - Chevron has reduced buyback spending in response to falling oil prices, while ExxonMobil has increased capital expenditures to drive low-cost production growth [9][10] Group 4: Cash Flow and Shareholder Returns - The combined free cash flow of the five major companies is expected to fall short of covering planned dividends and buybacks for the third consecutive quarter [10] - If oil prices remain around $70, companies are likely to maintain buybacks, but if prices drop to $60 or lower, some may cut back on buybacks while others may continue [10]

Core Viewpoint - Shell is facing a significant decline in earnings per share (EPS) and revenue compared to the previous year, which may impact investor sentiment and stock performance [2][3]. Group 1: Recent Performance - Shell's stock closed at $71.15, reflecting a +1.18% increase from the previous day, outperforming the S&P 500's gain of 0.06% [1]. - Over the past month, Shell's shares have decreased by 0.73%, which is better than the Oils-Energy sector's decline of 3.71% but worse than the S&P 500's increase of 5.88% [1]. Group 2: Earnings Forecast - The upcoming earnings disclosure is expected to show an EPS of $1.13, indicating a 42.64% decline year-over-year [2]. - Revenue is projected at $73.7 billion, reflecting a 1.8% decrease compared to the same quarter last year [2]. Group 3: Full Year Projections - For the full year, earnings are estimated at $5.98 per share, representing a -20.48% change from the previous year, while revenue is projected at $290.48 billion, showing a +0.5% change [3]. Group 4: Analyst Revisions and Rankings - Recent revisions to analyst forecasts for Shell are crucial as they indicate shifting business dynamics, with positive revisions suggesting analyst optimism [3][4]. - The Zacks Rank system currently rates Shell at 3 (Hold), with a recent downward shift of 2.68% in the consensus EPS estimate [5]. Group 5: Valuation Metrics - Shell's Forward P/E ratio stands at 11.76, which is higher than the industry average of 11.1 [6]. - The PEG ratio for Shell is 2.04, compared to the industry average of 1.98, indicating a premium valuation relative to expected earnings growth [6]. Group 6: Industry Context - The Oil and Gas - Integrated - International industry, to which Shell belongs, has a Zacks Industry Rank of 177, placing it in the bottom 29% of over 250 industries [7].

Summary of Global Oil and Gas Valuation Report Industry Overview - The report focuses on the **Global Oil and Gas** industry, providing insights into major companies and market dynamics as of **July 18, 2025** [1][2]. Key Companies Mentioned - **India**: Bharat Petroleum, Hindustan Petroleum, Indian Oil, ONGC, Reliance Industries - **Europe**: BP, BW LPG, Ceres Power, ENI, Fuchs Petrolub, Galp, Industrie De Nora, ITM Power, MOL, Motor Oil - **North America**: Aemetis, Antero Resources, APA Corp, Chevron, ExxonMobil, Halliburton, Suncor Energy, Valero Energy - **China**: CNOOC, Petrochina, Sinopec - **Saudi Arabia**: Saudi Aramco - **Others**: Companies from South Africa, Thailand, South Korea, Japan, Australia, and Latin America are also included [2]. Core Insights and Arguments - **Valuation Metrics**: The report provides various valuation metrics such as **EV/DACF**, **FCF Yield**, and **P/E Ratios** for major oil companies, indicating their financial health and market performance [9]. - **Performance Ratings**: Companies are rated based on their performance, with **Chevron** and **ExxonMobil** receiving "Buy" ratings, while **Equinor** is rated as "Sell" [9]. - **Growth Projections**: The report includes **CAGR** estimates for 2024-2027, indicating expected growth rates for different companies, with **Cenovus Energy** projected to have a **78%** upside potential [9]. - **Market Trends**: The report highlights trends in the oil and gas sector, including shifts towards renewable energy and the impact of geopolitical factors on oil prices [6]. Important but Overlooked Content - **Analyst Conflicts of Interest**: The report discloses potential conflicts of interest due to UBS's business relationships with covered companies, which may affect the objectivity of the analysis [4][5]. - **Macro Assumptions**: The report includes macroeconomic assumptions that underpin the valuations, sourced from reputable databases like Bloomberg and Reuters [6]. - **Definitions and Metrics**: Key financial metrics and definitions are provided to ensure clarity in the analysis, such as the **Nelson Complexity Index** for refining capacity [8]. Conclusion - The **Global Oil and Gas Valuation Report** provides a comprehensive analysis of the industry, highlighting key players, financial metrics, and growth projections while also addressing potential conflicts of interest and macroeconomic assumptions that could influence investment decisions [1][2][4][5][9].

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