Shell Q2 Earnings Preview: Can Refining Margins Save the Day?

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].