Shell PLC: Top quartile operational performance and a 10%+ 2H cash yield

Research evidence excerpt

Shell PLC: Top quartile operational performance and a 10%+ 2H cash yield

2 11.0%

Quarterly Forecasts (FYE Dec)Key CC takeaways.1) Upstream projects, FIDs and exploration. An FID of

Adj. EPS ($)

LNG Canada 2 remains on the cards by YE. Into 2027 Shell highlighted Bongo SW 2025A 2026E 2027E

and Zabazaba (both offshore Nigeria) and a possible sanctioning of the Dragon gas Q1 0.92 1.21A

field in Venezuela following an OFAC licence reinstatement (where Shell is also Q2 0.71 1.74A

assessing the Loran field). On exploration, Shell noted its most encouraging well Q3 0.92 1.28

Q4 0.56 0.94

result to date in Namibia. Two appraisal wells are being expedited into YE to FY 3.11 5.14 4.92

further assess volumes and commerciality; 2) Integrated Gas beat in 2Q despite

lost Qatari volumes. Shell outlined an effective portfolio management approach Style Exposure

whereby the lost volumes were compensated by higher supply from sources

including Nigeria, Trinidad and Canada, where LNG Canada has now shipped

>100 cargoes. The business also sourced a high end 3rd party volume component,

including deploying flex to buyback own cargoes and redirect; 3) Trading &

Optimisation amidst a higher volatility energy system, Shell is focusing on

controlling asset performance and possesses necessary portfolio diversity and

balance sheet strength. A through-cycle 2-4% ROACE contribution from trading

was reiterated and Shell indicated this is currently running at the top end of the

range under 1H conditions.

Model update. We raise FY26 NI ~10% to $29bn. This incorporates the 2Q beat

(~10%) and a MTM of 3Q Brent to forward $85 (+$10), refining to $20/bbl. The

FY CFFO increase is a lower LSD% owing to a lower 2Q derivative actual vs.

guidance midpoint (delta ~$2bn) and higher 2H cash tax forecasts.