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Shell warns on Ida Q3 hit, limited gas price benefit

Highlights

Upstream output to fall 5%-8% compared with year earlier

Refining, chemicals also suffer throughput setback

No earnings benefit from gas price spike

Shell will report a 5%-8% drop in third-quarter upstream oil and gas output compared with a year earlier, reflecting the hit to Gulf of Mexico production from Hurricane Ida, with refining also impacted, the company said Oct. 7.

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In a preview of results due on Oct. 28, Shell estimated the impact of Hurricane Ida on its Q3 upstream production at 90,000 b/d of oil equivalent, forecasting its overall output at 2.03 million-2.10 million boe/d. Several Shell platforms suffered damage in the hurricane that began in late-August, with some of its Mars and Ursa production expected to remain offline into 2022.

It also dampened hopes of a gas price boost to its finances, saying that in its upstream segment, "adjusted earnings is not expected to be significantly impacted by the prevailing strong gas price environment."

The company's downstream recovery was also set back by Ida, with the Deer Park refinery and Geismar petrochemical facilities both affected. The company's overall refinery utilization dropped to 70%-74% from 76% in the second quarter. However, margins were up from second-quarter levels at $5.7/b, compared with $4.17/b.

Shell's 'integrated gas' division, focused on LNG, provided greater stability, with production in the unit rising by 5%-13% to a range of 890,000-950,000 boe/d, although liquefaction volumes were down by an estimated 4%-10% at 7 million-7.5 million mt.

"Hurricane Ida in the US Gulf of Mexico had an impact on our operations and is expected to have an aggregate adverse impact of around $400 million on Adjusted Earnings and CFFO in the third quarter 2021," Shell said.