Shell Plc Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Performance: Adjusted earnings were $5.4 billion, cash flow from operations $12.2 billion. Strong performance across businesses with positive momentum.
• Simplification: Progress made, e.g., QGC asset in Australia had all-time high production with 90% reduction in well site permits. Portfolio simplification: divested 400 lower-performing retail sites, completed divestment of Colonial Pipeline noncore interest ($1B proceeds), sold five Savion solar projects.
• Discipline: Decided not to restart HEFA biofuels facility in Rotterdam. Maintained $20B-$22B cash CapEx range, took final investment decision on HI gas development project in Nigeria.
• Financials: Net debt decreased, 4-quarter rolling shareholder distributions 48% of CFFO (in line with target), announced $3.5B share buyback program.

Segment Performance

• Integrated Gas: Strong operational delivery led to higher liquefaction volumes. 13 cargoes were delivered from LNG Canada Train 1 in Q3, and Train 2 is expected to start up later in the quarter. Revenue contribution from LNG trading and optimization increased due to these volumes.
• Upstream: Strong operational performance resulted in higher production. Brazil and the Gulf of America made up over half of liquids production. Brazil achieved highest ever quarterly production, and the Gulf of America reached highest quarterly production since 2005, supported by successful project ramp-ups like the Whale project.
• Marketing: Delivered second highest quarterly adjusted earnings in over a decade, capturing more value through growing margins of premium products.
• Chemicals & Products: Improved quarter-on-quarter with stronger crude and products trading, but chemicals faced weak margins.

Guidance

• Net debt expected to increase in Q4 due to unusual items like biofuels and emission certificate payments.
• Continues to invest within $20B-$22B cash CapEx range.
• Expectations for LNG Canada Train 2 startup later in Q3 and Pavilion contributing more in 2026.

Risks

• Uncertainty in supply-demand fundamentals for 2026, potential oversupply.
• Geopolitical and macroeconomic factors impacting prices.
• Challenges in chemicals business with weak margins, need for further OpEx reductions.
• Outcome of Venture Global arbitration disappointing, need to explore pathways to protect rights.

Question and Answer

Q: How sustainable is the Upstream performance going into 2026 and beyond?

A: Wael Sawan mentioned focus on brilliant basics, turnarounds below schedule/budget, leveraging AI/data for operational excellence, expecting sustainability with new projects like Mero-3/4, Whale.

Q: How is AI deployment impacting the business?

A: Wael Sawan said AI used in detecting issues before materializing, optimizing trading, and working with hyperscalers for renewable energy.

Q: Any updates on LNG Canada Phase 2?

A: Wael Sawan said joint venture working on framing decision, considering federal/provincial support, transportation advantage vs US.

Q: What's the path back to profitability for the Chemicals business?

A: Wael Sawan said need for more OpEx/CapEx reductions, focusing on cash preservation to reach free cash flow neutrality.

Q: What's the situation with Venezuela and Trinidad?

A: Wael Sawan said assessing situation, working with government, early days to judge outcome.

Q: How is capital allocated in renewables?

A: Sinead Gorman said moving from producing to trading assets in renewables, reallocating capital from unproductive areas.

Q: What's the scale of inorganic investment?

A: Wael Sawan said looking for value-driven opportunities, focusing on existing positions for incremental value.

Q: Thoughts on U.K. North Sea business?

A: Wael Sawan said excited about Adura JV, needing predictable tax systems for upstream investments.