Shell's strong Q1 gas and oil operations seen offsetting 'quirk of accounting' loss

Shell (NYSE:SHEL) +1.3% in Thursday's trading after issuing a mostly upbeat outlook for its Q1, including a "significantly higher" performance in its integrated gas and oil products division than in Q4 2022.

Shell (SHEL) said it expects Q1 integrated gas production to increase to 930K-970K boe/day, from 917K boe/day in Q4 2022, and liquefied natural gas volumes of 7.0M-7.4M metric tons, up from 6.8M tons in Q4, on higher uptime at Prelude and QGC in Australia.

Upstream production is seen at 1.8M-1.9M boe/day, in line with 1.86M boe/day produced in the prior quarter.

The company also anticipates a wider adjusted earnings loss of $900M-$1.2B for Q1, compared to a $600M adjusted loss in Q4, but AJ Bell Head of Financial Analysis Danni Hewson sees the loss as just a "quirk of accounting, reflecting one-off tax charges which could well be the result of booking the impact of future windfall taxes upfront."

Citi analysts said improvements in the gas and oil businesses likely will spark a recovery in market expectations for Q1 net income to the mid-$8B range after a recent drop to ~$7.5B.

The update showed "encouraging signs" for Shell (SHEL), RBC analyst Biraj Borkhataria said. "More importantly, Shell is starting to show some operational momentum, and nudged up its liquefaction guidance for the first time in a while."

Shell (SHEL) should continue generating double-digit returns in the current pricing environment while protecting itself from a downturn, The Value Portfolio writes in an analysis posted recently on Seeking Alpha.