Shell PLC Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Josh Stone - UBS - Analyst : Hey, good afternoon. Two questions, please. Firstly, in your prepared remarks, you talked about Shell playing through its strengths through the energy transition. And as I sort of listen to that, and reread it, I just want to sort of unpick what that really means. Because on one hand, I could interpret that as business which is going to keep investing on low carbon assets where it sees it has some natural advantage. But on the other, I could also interpret that as Shell is going to stick to what it does best. So if I look at these results, that would be integrated gas, upstream, a more profitable mobility business. So can you just clarify? So where do you see Shell strengths today and what that really means? And then secondly, on the cash flow, impressive result this quarter. Cash flow growth when in a declining commodity environment, particularly versus the peer group. If I look at look over history, your fourth quarter normally is when there's a weak cash flow performance in the year, sort of the way costs are accrued. Is there any reason this time might be different just in the light of the sort of cost savings you're seeing inside the business? Thank you.

Question: Ryan Todd - Piper Sandler - Analyst : Great. Thanks. Maybe a couple questions for me. First, on the capital side. Just impressive performance and driving capital costs down this year with '24 likely to come in below the low end of the range. Can you maybe walk through what are some of the biggest drivers of lower capital budget this year? And as we look into 2025, how we should think about what this implies for 2025 CapEx and whether we might see it fall further? And then maybe on the second front -- for a second question, sprint is kind of turning things around particularly in terms of capital allocation, driving down costs. Some of which has been doing lack of a better word stuff with your money as well as towards the coming years. I would think there's dial that will shift. With that in mind, can you maybe talk a little bit about what you view is as your portfolio of investment opportunities, where you feel like you're particularly well positioned, strengthen further the Q and of investment opportunities particularly on the upstream side?

Question: Lydia Rainforth - Barclays - Analyst : Good afternoon both and thanks for taking my question. Two if I could. The first one and it's just a lovely memory. But can you take us on the appeal on the Hague court ruling to cut Scope 3 emissions [45]? And when might we expect a decision from the court? And can you talk us through Shell's options in both the case that you lose the appeal and then if you win as well, what do you think the outcomes are? And then secondly, just on the LNG side, integrated gas, we certainly need to be having less seasonality than we have seen before during 3Q. And is that something you think continues? And can you help us think about that LNG market into '25? Thanks.

Question: Biraj Borkhataria - Royal Bank of Canada - Analyst : Hi. Thanks for taking my questions. I just had to follow up on the CapEx guidance. Last call I asked this question, but you mentioned you had a number of payments towards the end of this year. That would -- that's why you kept the guidance. So could you just let us know whether the part of the reduction today is just phasing into 2025 or is the overall spend plan down for that period -- for '24, '25. And then secondly, I think just on capital framework, you know, one of the things that does separate you from the peers is how strong the (inaudible). And obviously, it shows through in slide 9, obviously, the environment has turned more negative relative to the last couple of years and you have a substantial buyback program in place. So just wondering how you're thinking about where you want the balance sheet to be because the balance sheet obviously affords you flexibility and optionality. At the same time, your shares are cheap. So you you know may make sense to keep up the purchases. So just trying to get a sense of how you're thinking about those two competing factors. Thank you.

Question: Alastair Syme - Citigroup - Analyst : Thanks Sinead. And can I just really one question? I mean you to look to make space in the capital budget. Can I really ask how you see the landscape for asset prices across -- different parts of the business, the Upstream, Downstream. I mean, normally I guess the best deals are done when sellers have a bit of stress. So, you know, are you seeing stress across these different parts of the system at any point? Thank you.

Question: Roger Read - Wells Fargo Securities - Analyst : Yeah. Thank you. Good morning or good afternoon to you, I guess. I'd like to hit on two things. One, as you think about the performance this quarter and the outlook in terms of cost controls or optimization as was mentioned earlier, maybe a little more info on what you mean by optimization. We've heard about, reducing head count in the company and so forth, how that's maybe flowing through to this, that big question number one. And then the other question, just anything else you can offer on the trading performance, given, what was generally a relatively low volatility in, in terms of commodity prices, just maybe what drove the performance there? Thank you.

Question: Michele Della Vigna - Goldman Sachs Group, Inc. - Analyst : Thank you and congratulations on the strong results. Two questions, if I may. The first one is on cost cutting, you are now effectively wrapping up the first year. You've made tremendous progress towards the $2 billion to $3 billion. I'm just wondering if you are starting to identify more opportunities as you go into the next phase of your efficiency program. And secondly, going back to exploration, you've had success in Namibia, I believe you probably looked into the Galp. I believe you shared data with Total. So you probably have a very good understanding of that area after everything that you've learned. I was just wondering how you're thinking about that, that region and your opportunity for growth there towards, you know, the end of this decade or the beginning of the next one. Thank you.

Question: Irene Himona - Bernstein - Analyst : Thank you and congratulations on another quarter of strong delivery. My first question, you've distributed 43% of CFFO in the past year. Your official range is [30 to 40] you have the strongest balance sheet, as you mentioned since the BG deal plus the stock remains undervalued. So, should we think of this as perhaps permanently moving to above your official range for the payout? And then secondly, if you can perhaps share your views on the 2025 outlook for European Gas and for your global LNG earnings. Thank you.

Question: Giacomo Romeo - Jefferies - Analyst : Yes. Thank you. Two questions for me and the first one is on the LNG market. You mentioned the contract you signed with the Botas in Turkey. There have been some headlines suggesting that term pricing is coming down particularly related to this agreement. Are you seeing a more challenging market in the (inaudible) market? Second question I wanted to ask is the can you remind us where we stand in terms of the key hurdles to taking FID on the second phase of LNG Canada? And are you happy with the acreage? You have in around those assets. Are you -- would you be looking to add more acreage in the area?

Question: Lucas Herrmann - BNP Paribas Exane - Analyst : Thank you very much and as with the others, it's very encouraging to see the performance. Couple if I might, I just wanted -- we're into the fourth quarter, it's that time of year when we all start to speculate around dividend, I guess, very frustratingly share price is the same level as it was a year ago. A year ago, you were very clear that the preference is very much the buyback that you held with the 4% growth in dividend. Would it be sensible to assume? And I know it's a board decision, but I guess it would be sensible to assume that that would be a practical approach this time as well. So, you know, question one is really around dividend and thinking and whether there's any change. And second, sorry, it's a little bitty. It's again in part around LNG. Can you just remind me where are we with venture and the volumes actually starting to flow to your business? This is kind of leaving aside the litigation if one can, but is there a point at which actually the [2 million] that you were due should officially stop? I know you, but I can't say that because well, for obvious reasons. But was there effectively a day a hard deadline? Sorry just staying with volumes Pavilion, the expectation is still that the trade will complete by the end of the year? Thank you.

Question: Matthew Lofting - JPMorgan Chase & Co - Analyst : Hi, thanks for taking the questions and congratulations on a robust update, absolute and relative. It strikes me looking at the numbers that again this quarter, if we combine the upstream and integrated gas businesses, the aggregated numbers of a beaten consensus expectations. That's been several quarters in a row, that's been the case now. So could you just talk a bit about sprint related underlying benefits and deal as within those businesses and where, where you think you're creating the value that they should sustain 2025 plus? And then secondly, I think in Sinead's opening remarks, you mentioned the early stages that shell is still in on the journey that, that it's on. Clearly, we could interpret that in a multiyear and possibly even multi decade context in, in terms of the transition. But if we bring it back to the next 6, 12, 18 months, what are the sort of the big ticket milestones that you're looking at in an operational and fiscal sense? Thank you.

Question: Doug Leggate - Wolfe Research. - Analyst : Thank you. Good afternoon, everybody. Thanks for having me on. While I wonder if I know you're going to do the Capital Markets Day next year and give us an update post for sprint. But I wonder if I could just press a little bit on the capital flexibility below $22 billion this year are clearly very impressive. But it seems that as a result of selective decisions, largely pivoting away from renewables and energy solutions. Why should we not expect that to continue or maybe to ask the question slightly differently? Is it possible that $22 billion to $25 billion stays in place? But the relative allocation of capital pivots back to some of the other businesses where you obviously have plenty of opportunities.

Question: Kim Fustier - HSBC - Analyst : Hi, good afternoon. Thanks for taking my questions. I wanted to ask about Nigeria since the sale of the (inaudible) assets has been rejected by the authorities. How much due diligence do you feel you've done on the buyer? And what do you think the next steps are in the process? My second question is on power. You bought CCGD plant in the US this quarter. How much gas fire capacity do you believe you ultimately need to underpin sales of nonintermittent clean power to your customers? Thank you.

Question: Christopher Kuplent - BofA Securities - Analyst : Thank you very much. I'll keep it very short. Just checking. Singapore is still held for sale. Can you comment a little bit around the tailwind you expect now that you've put through impairments on all those lovely items like depreciation and underlying OpEx, et cetera and let's face it. What is an underperforming division given the macro environment that we're in, right? So just wanted whether you can comment a little bit around those tailwinds and perhaps talk us through some of the other assets that you've mentioned are always on, let's say the test block. Where you see more exciting tailwinds from underperformance, particularly thinking about your downstream positions. Thank you.

Question: Martijn Rats - Morgan Stanley, Research Division - Analyst : Hi. Hello. Well, I look most of the important questions have been asked, but there's one left that I'm somewhat intrigued about which hope you could help me with. I noticed that refinery throughput was down about 100,000 barrels a day or so quarter on quarter. And also the guidance for that line item for the fourth quarter doesn't imply much of a rebound to sort of suggested that refined utilization could sort of continue to tail off a little bit. And I think many of us are trying to figure out sort of where exactly we are in terms of refining margins versus the level that would trigger economic run cuts. So I was wondering in that 100,000 barrel a day reduction in refinery throughput, is there an element of economic run cuts in there or is it all just explained by maintenance and operational issues?