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Shell reports unexpected dip in upstream output, LNG output jumps

Highlights

Previously forecast upstream increase of 50,000-100,000 boe/d

LNG expansion continues apace

Continued disconnect between gas prices and Brent

London — Shell's upstream oil and gas production dipped by as much as 2.7% in the third quarter 2019 compared with a year earlier, while its LNG liquefaction increased by at least 10%, it said in a preliminary disclosure for the quarter ending Monday.

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In a partial snapshot of results ahead of its full quarterly earnings statement, Shell put its Q3 upstream productionat 2.60 million-2.65 million b/d of oil equivalent, down from 2.67 million boe/d in the third quarter 2018, without indicating the oil and gas split.

It had forecast in its last results statement that upstream production would be up in the third quarter, by 50,000-100,000 boe/d, compared with a year earlier.

Shell also noted that prices for gas and natural gas liquids continued to be "disconnected" from Brent benchmark oil prices, reflecting exceptionally weak gas market conditions. And it indicated an uptick in write-offs for unsuccessful exploration drilling, saying well write-offs would be $250 million-350 million higher than in Q3 2018, when the write-off level was $149 million.

It estimated its LNG liquefaction volumes at 9.00 million-9.30 million mt, up from 8.18 million mt in Q3 2018. Production in its 'integrated gas' unit, which provides gas for LNG, was 930,000-960,000 boe/d in the third quarter, up from 924,000 boe/d a year earlier. It also reported a strong trading and optimization performance in LNG.

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In the downstream, Shell said its refinery availability had been in the range of 90-92%, roughly in line with a year earlier. Oil product sales were up compared with a year earlier, at between 6.70 million and 7.35 million b/d, while chemical sales were down, at 3.90 million-4.00 million mt, it said, noting it had completed the sale of its stake in Saudi refining joint venture SASREF in September.

Shell plans to publish full third-quarter results on October 31, but said Monday's end-of-quarter statement was in response to investor feedback and part of efforts to increase transparency.

-- Nick Coleman, nick.coleman@spglobal.com

-- Edited by Alisdair Bowles, alisdair.bowles@spglobal.com