Shell starting to 'sprint' under new leadership, results under microscope
Last updated: 16:19 23 Jan 2024 GMT, First published: 15:03 23 Jan 2024 GMT
Ahead of results from Shell PLC (LSE:SHEL, NYSE:SHEL), Barclays thinks the oil giant has begun its “first sprint” under new leadership – with an increased focus on competitiveness, discipline and costs – but more remains to do to improve performance.
Final results are due from the FTSE 100's largest company on Thursday 1 February, where investors and analysts are likely to be keeping a close eye on cash allocation plans.
Barclays is particularly looking to hear about two assets, the Prelude floating liquefied natural gas (FLNG) facility and the Pennsylvania ethylene cracker, which it believes could account for an earnings gap of around $3 billion in its estimates.
The bank said Shell’s cracker in Pennsylvania, USA is designed to produce 1.6mtpa of polyethene, both high and low density, but issues have meant it is only set to be operating at capacity in 2024 with a full earnings contribution in 2025.
The broker sees a US$1.5-2 billion delta in earnings from this plant alone, a "meaningful contributor" to earnings.
Barclays also highlighted the potential for the Prelude LNG facility in Australia, which has a capacity of 3.6mtpa but has where production has been intermittent since its start-up in 2023 due to both industrial action and mechanical issues.
But Barclays estimates incremental production from the facility could be up to 1 million tonnes in 2024 with the uplift in EBITDA as $0.5-1.0 billion depending on optimisation opportunities.
Barclays has an ‘overweight’ rating on Shell, and a 3,800p price target.
