Shell plc SHEL, the British oil and gas giant, has mentioned that its refining margins took a significant hit in the third quarter. The company’s profit margin in the Refining segment dropped 30% compared to the previous quarter. This was mainly due to a decline in the demand for refined products globally.
The drop in refining margins due to a slowdown in economic activities globally is anticipated to affect the third-quarter earnings of major energy firms worldwide. Further, refineries entering the market are increasing competition, resulting in an oversupplied market and laying downward pressure on prices. This is also expected to weigh on the third-quarter earnings of major energy players.
Shell Provides Q3 Guidance
Shell is expected to announce its quarterly results on Oct. 31, 2024. Ahead of theearnings call the company has provided an update, showing a substantial decline in its indicative refining margins from $7.7 per barrel (in the previous quarter) to $5.5. Furthermore, Shell mentioned that its trading results for the chemicals and oil products division would also be lower than the prior quarter. This indicates that Shell’s financial performance in these divisions might have been negatively impacted in the third quarter.
Shell is the largest trader of liquefied natural gas (LNG) globally, implying that the company trades LNG cargoes. SHEL raised its production guidance for the quarter from 6.8-7.4 million tons to 7.3-7.4. However, the company has mentioned that the trading results for the LNG segment will remain flat sequentially.
Q3 Updates From Other Energy Companies
The third quarter has witnessed a 17% decline in oil prices compared to the second quarter. This is anticipated to adversely impact the third-quarter results of many major energy firms. Exxon Mobil Corporation XOM has announced that the slump in oil prices may lower itsupstream profit by $600 million to $1 billion. Furthermore, declining refining margins are expected to reduce third-quarter earnings by up to $1 billion. XOM is expected to announce third-quarter results on Nov. 1, 2024, when the full effect of these developments will be realized.
Natural gas prices have risen in recent months, which may have a particularly favorable effect on third-quarter results of upstream companies. Many natural gas producers like EQT Corporation EQT have decided to increase their production due to the commodity’s price uptick. EQT and other U.S. gas producers scaled back production in early 2024 when natural gas prices dropped to multi-year lows. However, rising demand and favorable natural gas prices have led EQT to ramp up production once again.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpExxon Mobil Corporation (XOM) : Free Stock Analysis Report
EQT Corporation (EQT) : Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
