Shell Plc Q3 FY2024 earnings call

• Energy Transition Beliefs: Shell believes the energy transition is a multi-decadal journey requiring multiple energy forms. Gas is seen as a foundational part of the energy complex for decades, and Shell leverages strengths in LNG, trading, and customer understanding in sectors like marine. • Capital Allocation: Focus on free cash flow per share growth. Organic spend is below $22B, with plans to retain flexibility for growth opportunities. • Operational Highlights: Mero-3 in Brazil started up, divestment of Shell Pakistan completed, Atapu 2 FID in Brazilian assets, continued investment in LNG projects (Qatar, LNG Canada, Nigeria), and progress in deep water upstream projects like the Gulf of Mexico's Vito project phase 2. Marketing business showed strong earnings growth with efficient capital use.

The transcript doesn't explicitly break down segment performance by absolute revenue and contribution % in detail. However, key segments mentioned include Integrated Gas, Upstream (deep water, Gulf of Mexico, Brazilian assets like Mero-3 startup and Atapu 2 FID), and Marketing. For example, the marketing business had incrementally generated 20% more earnings in the past three quarters year-to-date at roughly the same average crude price as the first three quarters of the previous year.

• Capital Expenditure: Organic spend is expected to be between $22B to $25B in 2025. • LNG Market: 2025 outlook is challenging due to volatility and geopolitical factors, but physical market balance is seen through the next year. • Buybacks: Continued preference for share buybacks, with 12 quarters of announced buybacks of at least $3B.

• Court Decision: Judgment on MD appeal for Scope 3 emissions cut is on November 12, with potential for appeals and long legal processes. • Market Volatility: Uncertainty in gas markets, including geopolitical changes, demand-supply cycles, and intermittency of renewables. • Regulatory Hurdles: Challenges in completing transactions like the Nigeria asset sale due to regulatory review and addressing regulator questions.

Q: Clarify Shell's strengths and cash flow in Q4 A: Wael Sawan discussed Shell's strengths in LNG, trading, customer understanding in marine, and upstream deep water. Sinead Gorman noted Q4 has usual factors like Pearl GTL turnaround and tax phasing, but Shell is focused on OpEx consistency.

Q: Capital budget drivers and 2025 CapEx A: Wael Sawan said capital allocation leans into LNG, upstream deep water, and selective marketing investments. 2025 CapEx guidance remains $22B to $25B with focus on capital efficiency.

Q: MD appeal and LNG seasonality A: Wael Sawan said MD appeal judgment is Nov 12, Shell confident in case. Sinead Gorman noted less seasonality in LNG market going forward.

Q: CapEx guidance and balance sheet A: Sinead Gorman said 2024 CapEx is below $22B, balance sheet is strong providing flexibility, and net debt may fluctuate but balance sheet is resilient.

Q: Asset prices and investment strategy A: Wael Sawan said integrated gas opportunities are attractive, upstream is transactable but patient, downstream and renewables have key platforms, and marketing has selective small investments.

Q: Cost optimization and trading performance A: Sinead Gorman discussed trading performance with lower volatility, and Wael Sawan talked about cost optimization as part of cultural change in Shell.

Q: Namibia exploration and cost cutting A: Wael Sawan said Namibia exploration is challenging, learning from others, and Sinead Gorman noted progress on $2-3B cost-cutting target is on track.

Q: Dividend, LNG volumes, and 2025 gas outlook A: Sinead Gorman said preference for buybacks, Pavilion trade expected to complete by end of year, and 2025 gas outlook is uncertain with market balance but adapting to pre-2022 realities.

Q: LNG market and LNG Canada Phase 2 A: Wael Sawan said LNG market has cycles, Turkey contract opens option, and LNG Canada Phase 2 joint venture is developing proposal with focus on Phase 1 progress.

Q: Dividend and Pavilion trade A: Sinead Gorman said preference for buybacks, Pavilion trade expected to complete early next year with incremental value in second half 2025.

Q: Sprint benefits and operational milestones A: Sinead Gorman said Sprint benefits include upstream and integrated gas beating consensus, with maintenance efficiency and cultural change driving results. Operational milestones include Sprint 1 progress towards 500k bpd.

Q: Capital flexibility and transition investment A: Wael Sawan said capital flexibility is for choiceful investments, stepping back from renewable generation where no material advantage, and investing in areas where competitive strengths are leveraged.

Q: Nigeria asset sale and power plant investment A: Wael Sawan said Nigeria asset sale has extensive due diligence, and Sinead Gorman talked about power plant investment linking to off-take and trading capabilities.

Q: Singapore asset sale and downstream performance A: Sinead Gorman said Singapore is held for sale with turnaround in progress, downstream has challenges in refining and chemicals but focus on optimization and self-help.

Q: Refinery throughput and maintenance A: Wael Sawan said refinery throughput reduction in Q3 is due to maintenance and unplanned downtime, with turnarounds ongoing in various refineries