Shell to incur $400 million hit in Q3 due to Hurricane Ida

Royal Dutch Shell said on Thursday that it expected to incur a $400 million hit to its third-quarter earnings, to be reported this month, from August’s Hurricane Ida.

On the other hand, the oil company raised its cash flow forecast due to rising electricity prices.

Gas and electricity prices have been surging since tight gas supplies face strong demand in countries recovering from the pandemic.

Shell’s third-quarter cash flow in its liquefied natural gas unit is “expected to be significantly impacted by margin flow, a major change on the back of the current gas and electricity price environment”.

The company’s liquefaction is forecast to be between 7.0 and 7.5 million tonnes during the quarter, which would be its lowest since 2016, while “reflecting feedgas shortages and additional maintenance”.

Meanwhile, the company’s upstream oil and gas production is expected to be within the range of 2.025 to 2.1 million barrels of oil equivalent per day during the quarter because of prolonged outages of nearly 90,000 barrels of oil equivalent per day at some of its offshore fields in the Gulf of Mexico.

Sales volumes will probably fall within the range of 4.3 million to 5.3 million barrels per day, which would be their highest level since the first quarter of 2020, but yet, not even close to pre-pandemic levels.

The oil major also expects its refinery utilization rates to be impacted by Hurricane Ida.

In Q2, Shell raised its dividend for a second straight three-month period, by 38% to $0.24, one year after its first dividend cut since the 1940s. The company also launched a $2 billion share buyback programme, which is expected to be completed by the end of this year.