Shell indicated on Wednesday that a decline in first-quarter natural gas production and impacts on short-term liquidity would be partially offset by robust earnings from its oil trading division. This provides an early glimpse into how the US-Israel conflict with Iran is reshaping the profitability dynamics for major oil corporations.
Since the US and Israel initiated strikes against Iran in late February, followed by Iran's closure of the Strait of Hormuz and attacks on Gulf neighbors—including Shell's Pearl gas-to-liquids plant in Qatar—the global benchmark Brent crude price has surged to near $120 per barrel, a multi-year high. Repairs to the Pearl facility could take approximately one year.
Shell stated that significant volatility in commodity prices has led to large swings in the value of its inventories, driving its working capital—a measure of liquidity calculated as current assets minus current liabilities—to a range between negative $10 billion and negative $15 billion for the quarter.
The company noted that if oil and gas prices decline, the movement in working capital is expected to reverse over time.
Unusual Market Conditions Analysts at RBC Capital Markets remarked that the scale of this volatility underscores how abnormal current market conditions have become, but added that Shell's balance sheet should be capable of absorbing the impact.
RBC raised its estimate for Shell's first-quarter net profit by 7% to $6.8 billion and projected a 31% increase in operating cash flow, excluding working capital movements, to $17.1 billion.
UBS analysts lifted their first-quarter net profit forecast by 18% to $6.9 billion and raised their operating cash flow expectation, adjusted for working capital effects, by 30% to $16.3 billion.
Shell anticipates that trading results in its Chemicals & Products division, which includes oil trading, will be significantly higher than in the previous quarter. Adjusted earnings in its Marketing segment, encompassing retail fuel stations, are also expected to improve.
Reduced Gas Production Guidance However, Shell lowered its integrated gas production guidance for the first quarter to a range of 880,000 to 920,000 barrels of oil equivalent per day (boepd), down from the previous forecast of 920,000 to 980,000 boepd. Production in the fourth quarter of 2025 stood at 948,000 boepd.
The company's liquefied natural gas (LNG) production outlook remains within prior guidance, as capacity constraints in Australia and outages in Qatar are balanced by increased output from the LNG Canada project.
Shell warned that net debt is expected to rise by $3 billion to $4 billion due to variable factors in long-term shipping leases. Net debt stood at $45.7 billion at the end of 2025, with a leverage ratio of 17.7%, below Shell's comfort level of 20%. UBS projects Shell's net debt will increase by $11.2 billion.
Adjusted earnings in Shell's Renewables & Energy Solutions division are forecast to rise to a range of $200 million to $700 million, compared with $131 million in the prior quarter.
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