Shell flags lower gas output, capital outflow amid Iran conflict but sees oil trading boost

The logo for Royal Dutch Shell appears above a trading post on the floor of the New York Stock Exchange. (AP Photo/Richard Drew, File)

LONDON — Shell said on Wednesday that weaker first-quarter gas output and a hit to short-term liquidity would be offset partly by stronger oil trading, offering an early glimpse into how the U.S.-Israeli war on Iran is reshaping oil majors’ earnings.

Global benchmark Brent crude climbed to multi‑year highs near US$120 a barrel after U.S.-Israeli strikes on Iran began in late February, followed by Tehran’s closure of the Strait of Hormuz and attacks on Gulf neighbors, including Shell’s Qatari Pearl gas production production plant, where repairs may take about a year.

Shell said commodity price volatility caused large swings in inventory values, pushing working capital - a liquidity measure of current assets minus liabilities - to between minus $10 billion and minus $15 billion in the quarter.

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Shell said it expected working capital movements to reverse over time if oil and gas prices ease.

Unusual current market conditions

RBC analysts said the scale of the swing underscored how unusual current market conditions have become, but added Shell’s balance sheet should absorb the shock.

RBC raised its net income estimate for Shell’s first quarter by seven per cent to $6.8 billion, and expects a 31 per cent jump in operating cashflow, excluding working capital, to $17.1 billion.

UBS analysts raised their estimates for first-quarter net income by 18 per cent to $6.9 billion and by 30 per cent for operating cash flow, excluding working capital effects, to $16.3 billion.

Shell expects trading results in its chemicals and products business, which includes oil trading, to be significantly higher than in the previous quarter. Adjusted earnings in its marketing division, including fuel stations, should also rise.

Gas output guidance lowered

However, Shell lowered its first‑quarter integrated gas production guidance to 880,000–920,000 barrels of oil equivalent per day, from 920,000–980,000 boed previously. Output in the fourth quarter of 2025 stood at 948,000 boed.

Shell’s LNG output outlook was within previous guidance as constraints in Australia and outages in Qatar were offset by a ramp‑up at LNG Canada.

It warned net debt would rise by $3 billion to $4 billion due to variable components of long‑term shipping leases. Net debt stood at $45.7 billion at the end of 2025, with gearing of 17.7 per cent, below Shell’s stated comfort level of 20 per cent. UBS expects Shell’s net debt to rise by $11.2 billion.

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Adjusted earnings in Shell’s renewables and energy solutions unit should rise to $200 million–$700 million, compared with $131 million in the previous quarter.

Full results for the quarter are due on May 7.

(Reporting by Stephanie Kelly and Shadia NasrallaEditing by Bernadette Baum)