ii view: Shell predicts Q2 boom in trading profit

Second-quarter trading update to 30 June

• Now expects integrated gas production of 610 to 650 thousand barrels of oil equivalent per day (Kboe/d), up from a previous 580-640
• Now expects liquefied natural gas (LNG) volumes of 7.4 to 7.8 metric tonnes (MT), up from a previous 6.8-7.4
• Now expects upstream oil production of 1,750 to 1,850 Kboe/d, up from a previous 1,620-1,820 Kboe/d
• Expects chemical refining margin of $20 bbl (per barrel), up from $17 in Q1

ii round-up:

Energy giant Shell (LSE:SHEL) today flagged "significantly higher" quarterly trading profits as well as raising production estimates.

Against the backdrop of disruption caused by war in the Middle East, second-quarter trading profit is expected to be "significantly higher" than the first quarter. Quarterly integrated gas production of between 610 and 650 Kboe/d, while down from Q1’s 909 Kboe/d due to war disruption, is up from management’s previous estimate of between 580 and 640 Kboe/d.

Shares in the FTSE 100 giant rose 3% in UK trading having come into this latest news up by 6% so far in 2026. That’s similar to rival BP (LSE:BP.). A war in the Middle East had caused the price of oil to rocket up to $126 per barrel, but has fallen back toward $70 per barrel following agreement of a tentative peace deal.

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Quarterly production volumes for Shell’s LNG are now expected to come in at between 7.4 and 7.8 metric tonnes (MT). That’s also improved from the energy giant’s previous estimate of 6.8 to 7.4 MT.

Second-quarter upstream oil production of 1,750 to 1,850 Kboe/d is raised from prior guidance of 1,620 to 1,820 Kboe/d.

A chemical refining margin of $20 a barrel is better than the $17 achieved in the previous first quarter.

Broker Jefferies reiterated its ‘buy’ rating on the shares post the update. Second-quarter results are scheduled for 30 July.

ii view:

Shell employs around 85,000 people across more than 70 countries. Alongside upstream exploration and production operations, downstream operations serve around 29 million retail customers a day. Electric vehicle (EV) charge points total around 88,000. Competitors include TotalEnergies SE (EURONEXT:TTE) and Exxon Mobil Corp (NYSE:XOM).

For investors, reduced production and higher costs caused by war in the Middle East are not to be ignored. Higher inflation because of severe spikes in energy prices may now cause interest rates to stay higher for longer, dampening future economic activity and reducing energy demand. A first-quarter rebalancing of returns to shareholders leaves total distributions reduced, while further energy price volatility following that generated by the war in Ukraine may accelerate government moves globally to diversify energy supplies, with switches to alternatives such as nuclear power.  

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More favourably, reduced Middle East production and shipping supply challenges will likely offer support to fossil fuel prices, at least near-term. Strategic focuses outlined in March 2025 include becoming the world’s leading integrated gas and LNG business, as well as making Shell simpler, more resilient and more competitive. Structural cost reductions total over $5 billion (£3.7 billion) since 2022, while a diversity of operations regularly allows one area of strength to counter another of weakness.

In all, extremes of energy price volatility from pandemic lows to wartime highs give room for caution. That said, the world’s addiction to oil and a forecast dividend yield of around 4% continue to leave Shell justifying its place in many investor portfolios. 

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 hold