Proactive Investors - Shell PLC (LON:SHEL) is slated to give the market its quarterly trading update on Friday, with analysts at Jefferies Investment Bank expecting a downbeat tone.
“We see some downside for both Shell and BP (LON:BP) ahead of their respective trading updates as the companies may warn about the challenges faced by their gas trading businesses during the quarter (falling volatility for most spreads),” Jefferies analyst Giacomo Romeo said.
“Additionally, BP will be impacted by downtime at Whiting and Freeport LNG. GALP should continue to disclose incremental details on the Namibian discoveries.”
More broadly, the Jefferies analyst gave a dim view of the sector’s prevailing economics.
“We expect sector earnings to decrease -13% q/q, implying a 9% downside to current consensus levels,” Romeo added.
“Gas prices mark to market will guide earnings revisions; but we also expect the performance of gas trading businesses also to be impacted by the material fall in regional and time spreads volatility.
“As we look at 2024, at strip prices, we see the sector facing an ~11% earnings downgrade risk (it was around 20% at the beginning of the year).”