By Christian Moess Laursen


Shell expects to book up to $2 billion in post-tax impairments after delaying construction of a major biofuels plant as European energy majors grapple with weak market conditions, while trading in its core gas division is set to fall on quarter.

The British energy giant said Friday that it expects to book an impairment after tax of between $1.5 billion and $2.0 billion mainly due to pausing construction of its biofuels facility in Rotterdam as well as the divestment of its chemicals refinery in Singapore.

The paused construction of the Dutch biofuels plant--one of Europe's largest, set to produce 820,000 metric tons of biofuels a year--was largely due to weak European market conditions, with profit margins squeezed by a large drop in U.S. renewable fuel-credits prices.

Shares in biofuels market leader Neste have shed nearly half their value this year, with the Finnish company in May cutting its renewable-fuel margin forecast. Shell's rival BP similarly paused biofuels investment at U.S. and German oil refineries recently.

Shell expects to write down between $600 million and $1.0 billion on the asset, while the impairment after the sale of its Singapore refinery is expected to be between $600 million and $800 million.

In addition, Europe's largest energy company expects trading results from its integrated-gas segment, usually its largest profit center, to be lower than in the first quarter, when the unit booked $3.68 billion in adjusted earnings, due to seasonality.

However, it expects the unit's results to match those of the second quarter last year, when it booked $2.5 billion in adjusted earnings--a metric that strips certain commodity price adjustments and one-time charges.

The company also narrowed the segment's liquids and natural-gas production outlook slightly upward to 940,000 to 980,000 oil-equivalent barrels a day for the quarter, from a previously guided range of 920,000 to 980,000 BOE a day.

Shell, the world's largest liquefied natural gas trader, expects its quarterly LNG volumes to be between 6.8 million and 7.2 million metric tons, compared with the prior-year's 7.2 million tons.

This would mean a decline from the first quarter's 7.6 million tons. However, gas prices in Europe have rallied in recent months on strong demand in Asia amid heat waves and outages limiting supply, potentially providing a boon to Shell's quarterly results.

On the upstream side--the extraction of crude oil and natural gas--Shell is expecting the unit to produce between 1.72 million and 1.82 million BOE a day ready for sale, versus 1.70 million a year prior and 1.87 million in the first quarter. In the first quarter, the segment garnered $1.93 billion in adjusted earnings.

Today's update contained things for both the bulls and the bears, RBC Capital Markets analyst Biraj Borkhataria said.

"LNG volumes were as expected, while upstream production was stronger than previously guided, and oil trading surprised to the upside," he wrote in a note to clients.

Additionally, the FTSE 100-listed company said its quarterly trading results from both the chemicals and products segment and its marketing segment--which includes electric-vehicle charging, wholesale commercial fuels and lubricants businesses--are expected to be in line with first-quarter results.

Its second-quarter results are scheduled to be published on Aug. 1.


Write to Christian Moess Laursen at christian.moess@wsj.com


(END) Dow Jones Newswires

07-05-24 0341ET