Shell's Pre-Earnings Snapshot: A Tale of Two Divisions

Shell's refining profits surge on strong margins, but gas production is down. The firm executes $3.5B buyback and signs major LNG deal with Greece ahead of May 7 earnings.

Ahead of its full first-quarter results due on May 7, energy giant Shell has provided a detailed operational update that paints a picture of starkly diverging fortunes across its business lines. The contrasting performance sets the stage for a critical earnings report.

The standout performer is the company's refining division. Shell has raised its indicative refining margin for Q1 2026 to $17 per barrel, a significant jump from the $14 seen in the previous quarter. This strength is underpinned by robust global demand for refined products, with refinery utilization rates expected to reach between 95% and 99%. This operational excellence is anticipated to fuel substantially higher profits from the trading and optimization unit, with results forecast to be well above the prior quarter's level.

However, this bright spot is clouded by significant challenges elsewhere. The integrated gas segment is feeling the pressure, with production now estimated at 880,000 to 920,000 barrels of oil equivalent per day. This marks a downgrade from prior guidance of 920,000 to 980,000 barrels, a reduction Shell attributes to operational disruptions in the Middle East that are impacting its activities in Qatar.

The financial picture is also mixed. The company faces a substantial headwind from extreme commodity price volatility, which is projected to cause a negative working capital effect of $10 to $15 billion. Concurrently, Shell expects non-cash net debt to increase by $3 to $4 billion, driven primarily by variable components within shipping lease contracts in the current market environment.

Amid these operational crosscurrents, Shell’s shareholder return program remains a constant. The company is aggressively executing its $3.5 billion share buyback program authorized for the first quarter. In a single day, April 8, Shell repurchased approximately 4.45 million of its own shares across trading venues in London and Amsterdam. This initiative represents the seventeenth consecutive quarter in which the company has bought back at least $3 billion worth of stock.

Strategically, Shell is cementing its role in Europe's energy security landscape. In February, the company finalized a five-year agreement with Greece's METLEN group. Starting in 2027 and running through 2031, Shell will supply between 0.5 and 1.0 billion cubic meters of liquefied natural gas (LNG) annually, primarily via Greek regasification terminals at Revithoussa and Alexandroupolis. As the world's largest buyer of U.S. LNG, Shell is positioning itself as a key supplier for European nations seeking alternatives to Russian gas.

Shell's share price has climbed roughly 23% since the start of the year, trading just below its 52-week high. The market now awaits the complete Q1 figures on May 7, with the analyst consensus set to be published on April 29. The final report will reveal whether the windfall from refining and trading is sufficient to fully offset the substantial capital outflows and weaker gas production.