This article first appeared on GuruFocus.
Shell (SHEL) said Tuesday it will take a $600 million hit in the third quarter after scrapping its biofuels project in Rotterdam but pointed to stronger profits ahead from its liquefied natural gas business. The company lifted its Q3 LNG output forecast to 77.4 million metric tons, up from 6.77.3 million earlier, and expects trading results in its gas division to come in significantly higher.
The update lands just weeks after CEO Wael Sawan warned that the world may soon face an LNG glut as more projects come online. At least five new or expanded export plants have already been approved this year, raising the risk that supply could outpace demand. Still, Sawan sees LNG as Shell’s biggest growth driver over the next decade, especially as developing countries shift from coal to gas to cut emissions.
Shell also expects Q3 upstream production between 1,790 and 1,890 kboe/d and refinery utilization of 94%98%. With 11 offshore platforms in the U.S. Gulf, the company continues to lean on its core gas and upstream strengths.Investors now look to Q3 earnings later this month for how margins and capital spending are shaping up.