Shell cuts LNG outlook, with more write-offs due for 2024 year end

Oil and gas giant Shell has reduced its estimates for liquefied natural gas (LNG) production for the last quarter of 2024, with significant well write-offs for upstream exploration and integrated gas also expected.

The details were revealed in an update to its fourth quarter 2024 outlook on Wednesday, ahead of the actual Q4 results due to be released on 30 January.

The company slashed expectations for its liquefied natural gas (LNG) production for the last quarter of 2024 to between 6.8-7.2 million tonnes, significantly below the 6.9-7.5 million tonnes previously expected. In comparison, Shell produced 7.5 million tonnes of LNG in the third quarter of 2024.

The lower outlook was mainly because of fewer cargo deliveries, as well as lower feedgas, which is a raw gas utilised while producing LNG.

Shell’s share price dropped 2.12% on Wednesday morning following the release of the update.

The company also predicted integrated gas earnings of between $1.2-$1.6bn (€1.16bn- €1.55bn) for the fourth quarter, as well as upstream earnings of between $2.4bn (€2.33bn) and $3.1bn (€3.02bn).

The company also expects write-offs for upstream exploration wells of approximately $400m (€389.19m), along with integrated gas well write-offs of about $300m (€291.79m) as well.

Disappointing news

Russ Mould, investment director at AJ Bell, said in an email note: “Shell’s leading position in liquefied natural gas is a key attribute which makes it stand out from its peers so news of reduced LNG production and volume guidance in the final three months of 2024 is disappointing for the market.

“The company’s usual teaser ahead of its quarterly results will have done little to whet appetites for the main event, with its trading business also in the mire and the timing of payments for emission certificates and an airline fuel duty payment in Germany hitting cash flow and working capital.

“These aren’t the kind of messages CEO Wael Sawan wants to be delivering to the market at a time when he is desperately trying to close the valuation gap with Shell’s US peers.

“The commodity price backdrop wasn’t helpful for Shell in the last quarter of 2024 but oil prices have been gaining ground in the early weeks of 2025 amid declining OPEC production and continuing signs the US economy remains robust.”

Shell continues to pull back from new offshore wind projects

Shell also recently announced that it would be slowing down its new offshore wind projects and investments, as investor pressure to maintain focus on its more profitable oil and gas business continued to increase.

Higher interest rates over the past few months have also meant that new financing for wind energy projects have become more expensive, further concerning investors. Ongoing supply chain issues in the offshore wind sector, as well as regulatory challenges have also created more risks.

Richard Hunter, head of markets at Interactive Investor, said in an email note: “As a stock, Shell faces the additional challenge of being in a sector which is the focus of some debate from an environmental perspective, with the ever-increasing possibility that some investors will be unwilling or unable to invest in the sector on ethical grounds.

“Of course, Shell’s shares are inevitably and inextricably linked to an oil price which has risen by just 0.5% over the last year, and which spent much of that time at lower levels. This is despite the uncertainties arising from the ongoing conflict in the Middle East and between Russia and Ukraine, but where ample supply and weakening demand from China have taken the upper hand.”

Hunter also highlighted that some other external concerning factors included future energy demand, windfall taxes, cost and usage levels.

However, Shell’s well-diversified operations which include chemicals, oil and gas, as well as renewable energy also means that losses and turbulence faced by any one division are often balanced out by strong performance in others.