Shell Warns Oil-Price Gains Partly Offset by Hit From Texas Freeze -- Update
By Sarah McFarlane
LONDON -- Royal Dutch Shell PLC said gains it made from higher
oil prices in the first quarter would be partly offset by
disruption related to the winter storm in Texas, knocking the
energy giant's recovery from the pandemic.
The company said Wednesday that the cold snap had hurt its
production, refining and chemicals operations in the state, and
would reduce earnings by around $200 million.
The unusually cold weather left millions of Texans without power
and resulted in outages at refineries and chemical plants,
disrupted pipeline flows, and froze oil and natural-gas wells.
Despite the disruption, Shell and other big oil companies are
looking to mount a recovery this year after reporting some of their
worst results on record for 2020. Covid-19 lockdowns sapped demand
for oil, sending prices lower, prompting Shell and its peers to
reduce costs, shrink workforces and cut dividends.
"In actual results the turning point will more likely be the
second quarter," said Jason Kenney, an analyst at Spanish bank
Santander, adding that energy companies' profitability should
continue to improve in the second half of the year given cost
cutting and the higher oil prices.
The benchmark Brent crude price has risen around 20% since the
start of the year, boosted by a recovery in oil demand, although
demand isn't yet back at pre-pandemic levels with lockdowns
continuing in some parts of the world.
Earlier this week, BP PLC said higher oil prices, strong trading
results and income from asset sales had helped it hit its
debt-reduction target early, signaling a recovery from the pandemic
was within sight.
However, Shell said it expected mixed trading results for the
quarter. Trading results aren't dependent on the direction of
energy prices, and rather can rise or fall as a result of price
volatility based on how successfully traders exploit price
Liquefied-natural gas prices were particularly volatile early in
the year, when cold weather, combined with outages at some plants,
pushed prices to record highs. Shell said the price volatility had
a limited impact on its earnings.
Shell said its refining and chemicals margins improved in the
first three months of the year compared with the fourth quarter
last year, but warned that activity at plants was lower than it had
projected in February.
"Operationally, the business appears to be performing below
expectations, with oil products and chemical utilization and
volumes clearly below guidance," said Biraj Borkhataria, an analyst
at RBC Capital Markets. The exception was integrated gas
production, which was higher than the previous guidance, he
Shell's shares were 0.6% higher in morning trading in
Write to Sarah McFarlane at firstname.lastname@example.org
(END) Dow Jones Newswires
April 07, 2021 07:29 ET (11:29 GMT)
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