Shell updates 1Q20 outlook

Integrated gas

• Production is expected to be between 920 and 970 000 boe/d, this includes the additional volumes from the Egypt offshore assets that were previously reported in the upstream segment.
• LNG liquefaction volumes are expected to be between 8.8 and 9.2 million t.
• Dividend payments from joint ventures and associates are expected to be lower than in other quarters, as is typically the case in the first quarter.
• Trading and optimisation results are expected to be average and approximately in line with 4Q19.
• More than 90% of the company's term contracts for LNG sales in 2019 were oil price linked with a price-lag of typically 3-6 months.
CFFO in Integrated Gas can be impacted by margining resulting from movements in the forward commodity curves. At the time of issue, Shell expects margining inflows not significantly different from those received in 4Q19.

Upstream

• Production is expected to be between 2.65 million and 2.72 million boe/d, this includes the impact from the transfer of the Egypt offshore assets to the integrated gas segment and the transfer of oilsands to the oil products segment.
• Upstream margins are impacted by the weak macro environment. Upstream results, excluding identified items, are also negatively impacted by the effects of a weak Brazilian Real on taxation, a non-cash item.

Oil products

• Refinery utilisation is expected to be between 80% and 84% with availability expected to be between 93% and 96%.
• Refining margins are expected to be weaker compared with 4Q19.
• Oil products sales volumes are expected to be between 6 million and 7 million bpd.
• Marketing margins in 1Q20 are expected to remain strong, as the impact on demand from Covid-19 is not expected to be significant at the Shell Group level in 1Q20.
• A material working capital release is expected largely driven by the change in quarter-end prices impacting inventory values.
• CFFO excluding working capital movements is expected to be impacted by the higher cash cost of sales.
• In February, the company completed the divestment of the Martinez refinery.

Other

• Based on changes to the company's oil price outlook for 2020, post-tax impairment charges in the range of US$400-800 million are expected for 1Q20. Impairment charges are reported as identified items.
• As per previous disclosures, CFFO price sensitivity at Shell Group level is still estimated to be US$6 billion per annum for each US$10/bbl Brent price movement.
• This price sensitivity is indicative and is most applicable to smaller price changes than Shell currently witnesses as well as in relation to the full-year results.
• As a result of Covid-19, Shell has seen and expects significant uncertainty with macro-economic conditions with regards to prices and demand for oil, gas and related products. Furthermore, recent global developments and uncertainty in oil supply have caused further volatility in commodity markets. The impact of the dynamically evolving business environment on 1Q20 results is being primarily reflected in March with a relatively minor impact in the first two months. Shell expects to provide further updates about the impact on its outlook in the 1Q20 results announcement.
• Shell’s liquidity remains strong. Shell has a new US$12 billion revolving credit facility commitment. This is in addition to the US$10 billion credit facility signed in December 2019. Together with cash and cash equivalents of circa $20 billion, available liquidity will rise from US$30 billion to more than US$40 billion. In addition, the Shell Group has access to extensive commercial paper programmes.

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