ii view: Shell cuts gas production forecast

First-quarter trading update

ii round-up:

Energy giant Shell (LSE:SHEL) today lowered expected quarterly production estimates for liquefied natural gas (LNG) given a combination of unplanned maintenance and cyclones impacting its Australian operations. 

In a recent strategy update, Shell flagged its ambition to become the world’s leading integrated gas and LNG business. But LNG volumes for the first quarter to late March are now expected to be 6.4-6.8 metric tonnes (MT), down from a previous estimate of 6.6-7.2 MT. Volume was 7.1 MT in the fourth quarter.  

First-quarter Integrated gas production is now expected to come in at 910-950 thousand barrels of oil equivalent per day (kboe/d), down from a previous forecast of up to 990 kboe/d. But that’s still up from the 905 kboe/d achieved in the fourth quarter. 

Against a backdrop of concerns about a global trade war and possible recession, shares in the FTSE 100 company fell 5% in UK trading having come into this latest news little changed year to date. Rival BP (LSE:BP.) is down 6% in 2025, the price of oil is down 15%, while more climate friendly natural gas is up 14%. 

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Shell's various divisions include integrated gas, chemicals and products and renewables and energy solutions. Adjusted earnings in relation to the chemicals division are expected to be in line with the fourth quarter.

Group net debt is expected to be $1.5 billion higher following the take-up of debt from its Shell Petroleum Development Company of Nigeria (SPDC) and its recent sale to Renaissance Africa Energy Holdings. First-quarter results are scheduled for 2 May. 

ii view:

Started in 1907, the group changed its name from Royal Dutch Shell to just Shell in 2022, moving its headquarters from the Netherlands to the UK. The FTSE 100 company serves approximately one million commercial and industrial customers, as well as around 33 million people daily at its Shell-branded retail stations. 

Management focuses include improving operational and financial performance, simplifying the business, as well as becoming a net-zero emissions energy business by 2050.

For investors, a potential trade war leading to a possible global recession would significantly dampen demand for energy. America's warmer relationship with Russia could potentially see Russian energy back on global markets, increasing supply and lowering prices. Tackling climate change remains a pressing need for both the industry and governments alike, while this latest update again highlights the impact which the weather can have on production. 

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More favourably, changes in strategy, and including exploration only in regions where hydrocarbons have already been found, is allowing capital expenditure to reduce and shareholder returns to potentially increase. Shell’s diversity of operations across oil, gas, chemicals, and retailing regularly allows one area of strength to counter another of weakness. Cost saving targets were previously increased, while group net debt of $38.8 billion at the end of 2024 was down from $43.5 billion year-end 2023. 

For now, risks have increased given significantly raised economic uncertainties in the wake of US trade tariffs. That said, the world’s need for fossil fuels persists, with Shell’s sizeable cashflows supporting a forecast dividend yield of around 4.5% and likely keeping investors interested. 

Positives: 

• Diversity of operations
• Focus on shareholder returns

Negatives:

• Uncertain economic outlook
• The weather can raise operational challenges

The average rating of stock market analysts:

Strong buy