殼牌 (SHEL) 2026 Q3 法說會逐字稿

Welcome to Shell's third-quarter 2026 financial results announcement. Shell's CFO, Sinead Gorman, will present the results, then host a Q&A session alongside Shell's CEO, Wael Sawan.

Welcome, and thank you for joining Shell's third-quarter results presentation for 2026. This quarter, we once again demonstrated our ability to deliver strong results in a highly volatile and elevated commodity price environment.

Our diverse portfolio, performance focus, and trading capabilities allowed us to capture further opportunities while we continue to work hard supplying our customers. All of this helped us deliver some $10.8 billion of adjusted earnings and $21 billion of cash flow from operations. We could not have delivered this without the hard work and dedication from colleagues right across Shell.

Let's turn to the performance of our businesses in more detail. In Upstream, we continue to deliver exceptional operational performance. In August, our assets in the Gulf of America delivered the highest monthly production in over two decades.

In Integrated Gas, we also delivered strong results underpinned by our advantaged LNG trading and optimization capabilities, and we look forward to unlocking the full potential of the ARC Resources acquisition, which completed in September. The acquisition strengthens our position in Canada, which is a key heartland and contributes 370,000 barrels of oil equivalent of production a day.

Our Marketing business performed well despite experiencing a lower margin environment. We were also pleased to see Shell Lubricants recognized as the best-selling supplier for a record 20th year in a row. This is testament to two decades of dedication from our team in supplying the high-quality lubricant and fluid solutions that our customers need.

Turning to Chemicals and Products, where performance was strong. In Products, record results were driven by another quarter of impressive refining performance as we achieved a utilization rate above 100% when excluding Rheinland, which was impacted by low Rhine water levels. In this dislocated market, we are showing agility in support of keeping our customers supplied. And Chemicals was free cash flow positive for a second quarter in a row as the team continues to work hard to unlock greater value.

Across the company, we have been complementing our strong operational performance with important portfolio changes through both further strengthening areas where we are competitively advantaged whilst also high-grading wherever we see the opportunity to do so. This was demonstrated through three important announcements we've recently made.

First, there was the completion of the ARC Resources acquisition, which I mentioned earlier. This acquisition complements our existing footprint in Canada, strengthening our resource base for decades to come. It extends our best-in-basin and natural gas capabilities into liquids from a top-quartile, low-carbon intensity producer.

Secondly, we announced last month that we have taken a final investment decision on LNG Canada Phase 2. This expansion will double liquefaction capacity at the facility, with Shell receiving nearly 6 million tonnes per annum of additional LNG volumes. It strengthens both our advantaged position in Canada and our global LNG portfolio.

Thirdly, we announced the acquisition of Tri Star Energy, which more than doubles the number of company-owned convenience retail sites in the US. These announcements show how we are reallocating capital from non-core assets, like Cyprus Gas, end-of-life Gulf of America assets, and Jiffy Lubes, into businesses where we expect to create significant value, and we are very pleased with the progress thus far.

Moving on to our financial framework. Our cash CapEx range for 2026 is now between $23 billion and $25 billion, which includes some $4 billion for the acquisition of ARC Resources. Since the end of last year, we have reduced net debt by $6 billion, with gearing at 17% at the end of Q3 or less than 3% when excluding leases. Taking a step back, I am really pleased to see that the strong performance that we have delivered has enabled us to further strengthen the balance sheet whilst completing the acquisition of ARC Resources, which added some $6 billion to our net debt position.

Now turning to our shareholder distributions. Our policy of shareholder distributions of 40% to 50% of CFFO through the cycle remains sacrosanct, aligned with our commitment to deliver attractive returns to our shareholders. Today, we have announced a further $5 billion share buyback program, which we expect to complete by the time of our Q4 results announcement. Our progressive dividend remains one of our key financial priorities, as can be seen by the 9% increase in our dividend per share over the last 12 months.

So to summarize, our Q3 performance demonstrates the good progress that we are making against our strategy and highlights our ability to adapt and respond in times of higher volatility and elevated macro conditions. We continue with the relentless pursuit of the transformation of the company, strengthening our portfolio, and driving performance, discipline, and simplification across the organization. We look forward to sharing more about the strategic progress we've made at our Capital Markets Update, which will take place on February 4, together with our Q4 2026 results.

Thank you.

We will now begin the question-and answer session. (Operator Instructions)

Thank you for joining us today. As you just heard from Sinead, Shell delivered a very strong set of results in this third quarter, with a strong operational performance in a highly volatile environment.

Now, Sinead and I will be answering your questions. (Event Instructions)

And with that, can we have the first question, please, Matt?

Lydia Rainforth, Barclays.

Thank you, and good afternoon. And it's really pleasing to see the results coming through. Two questions, if I could. The first one, just in terms of the portfolio, from the outside, it does look like there's been a lot of progress this year from ARC to LNG Canada Phase 2. And the exploration team also looks like they've had a busy summer. Can you put into context for us how much more confident you are in the resource base to be able to deliver growth into the next decade compared to possibly the start of the year?

And then secondly, and a little bit linked to that, but energy security now does seem to be that dominant conversation across most countries. What do you think that means for Shell, and are there more opportunities out there? How do you have to think about the portfolio mix? Are governments asking for more contributions? So I appreciate their very particular questions, but your thoughts would be very much appreciated. Thank you.

Yeah. Thanks, Lydia. Let me try to touch on both of those, starting maybe with the portfolio piece.

When we started this journey, we said portfolio strengthening was going to be a core part of what we wanted to focus on. And you've touched on building the resource base. I'd also point to the great success and good momentum that we have had in actually high-grading the portfolio, lots of moves already over the last few months.

Just in this quarter, we announced, for example, the sale of the Aphrodite Gas asset in the Eastern Med. We've announced the Na Kika-Coulomb completion. And we have others, for example, the Sprng platform in India, the onshore low-carbon, the one in the Netherlands, the sale to Total. All of that is really allowing us to high-grade the portfolio.

If I shift to the resource bit, yes, no doubt, I have continuing increasing confidence. But to be fair, I always felt that we were going to make the moves at the right time as long as we found the opportunities that were going to be value accretive. So let's touch on a few of them.

LNG Canada Phase 2, really pleased, lots of effort by the team there with support from both the provincial and the federal government to get it into FID and an exciting opportunity for the future. If I look at ARC, completing from the beginning of discussions to end within six months and being able to already have a one month of contribution into the Q3 results, giving us longevity, giving us advantaged, low-cost, low-carbon resources that synergize with the rest of the portfolio.

We announced Bay du Nord, which is, of course, an Equinor-run project that looks to FID early next year, again, continuing to add to our overall resource base but at the right points. Because this is not just about adding resources, this is about creating advantaged resources that allow us to have the longevity. 2030, as we have said in the past, is largely derisked. If I look into 2035, we're making very good progress, and of course, we'll share a bit more of that in Capital Markets Update.

The only other point I'll touch on, exploration, again, the restocking is going really well. I think the proof will be not just in 2026, but what happens in the next two years as we start to drill some of those wells. Early good signs from wells like Daenerys in the GoA. You read about Tupinambá, of course, BP as operator. And we're excited by the upcoming wells in Namibia, which follow through on the earlier success this year. So good momentum across the patch.

On energy security, I would say, clearly it has taken the priority in thinking across all the governments that I have the opportunity to meet. And energy security can sort of be seen as almost divorced from low carbon or divorced from affordability. It's all a package that comes together.

What we are seeing is that given our footprint, in particular our downstream presence, we have engagements with multiple countries. And what we are seeing is our trading and supply and the infrastructure that we have -- storage facilities, pipelines, our very strong position in shipping -- has meant that we are a natural player that they come to for thought leadership, for partnership, and where the opportunities arise for investment in their countries.

And so we're trying to keep an eye on what that new energy system world order is going to look like and how we will play in it. But what is absolutely clear to me is that the integrated strength of Shell will come to the fore in times like this.

Thanks for the questions, Lydia. Matt, let's go to the next question, please.

Lucas Hermann, BNP Paribas.

Yeah, thanks very much. Wael, Sinead, good afternoon, and obviously super quarter operations and cash flow, so congrats. Two questions, if I might.

Firstly, on distributions, Wael, on the Q1 call, you talked about being disciplined enough not to adopt a pro-cyclical approach to buybacks. Oil was trading $115, the share price was around 3,400p. And Sinead, you made reference to dynamic allocation and suggested that the share price, whilst undervalued, was no longer egregiously so. And that was a level some 20% below where we are today.

Of course, at the same time, you've long stated that you've got this 40% to 50% distribution, which you see as sacrosanct, albeit we've qualified that with the across-the-cycle comment. And I can see that the balance sheet improvement the past several months has been substantial.

But forgive me, whilst I'm not criticizing your generosity, I'm just struggling to understand today's announcement on buyback or at least how you think about the conflicting aspects of your statements. So how do you square the circle with putting to balance sheet and awaiting better value opportunities, be they your own equity or other investment opportunities, not have been a more appropriate value decision?

Sorry to carry on. But as to the balance, as the balance sheet becomes more fortress-like and your confidence in the business and durability of cash flow build, is it not time that you reallocated between the variable and fixed components of your distributions? I presume that must have been an important part of any debate that the Board will have had in yesterday's discussions.

And relative to peer, your return policy continues to appear to be overly weighted towards an inherently pro-cyclical, I think Chris would say, sugar rush component, i.e., the buyback. Sorry, not a criticism, but just trying to understand.

That's great questions, Lucas. Thank you very much for framing it that way. Let me maybe just provide a bit of a frame, but then I'm going to ask Sinead to really sort of tackle the heart of your question, which is what is the thinking process to get to the $5 billion, but more broadly, how do we use that thinking process as we go forward.

I'd start off by saying, if you'd asked me six months ago, would I have thought that oil prices were going to be where they are today, no. I'll be honest with you. I personally thought we were at a high there and we were essentially looking at what was going to be a temporal spike. We're now seeing more and more structural stability in that higher oil price simply because we are seeing that inventory levels are being drawn down very quickly. And it's going to take quite some time to be able to refill that inventory, not to mention new inventory that countries will want to have for energy security purposes.

I think importantly, when I talk about avoiding being pro-cyclical, it's at these high points in the cycle, not being at the top end of the range or above that. You'll recall six months ago, we were at 50% plus of that range, of the CFFO range, and what we did at that time was to move into the 40% to 50% range. We're not trying to predict what our share price is. And it's important to recognize, to Lydia's earlier point, we've been investing to fundamentally improve the intrinsic value of this company through projects like LNG Canada, through projects or investments like ARC. So the value of the company is growing.

But how we chose the $5 billion and that broader thinking, maybe Sinead, you want to share your thoughts.

Thank you, Wael, indeed. And as we've said a number of times, and Lucas, you put it very clearly, the fact that we say 40% to 50% of distributions are CFFO distributed through the cycle and that through the cycle has been key, so thanks for giving me the opportunity to just unpack that a little bit.

Probably good for me to talk about actually, as you say, Wael, the principles and how we think about it. So I think first and foremost, we've said about 40% to 50% being sacrosanct, but let's look at it in terms of the cycle. Really difficult to know how long a cycle is, et cetera. We know it's not in terms of the calendar year. We of course know that it goes across multiple years as well. So let's take the two bookends of that in terms of firstly in the high point of the cycle, and then let's look at the low point of the cycle.

So high point of the cycle, what are we looking to do? We're trying to make sure that we have compelling distributions for our shareholders as first and foremost key for us. But at the same time, we're looking to strengthen the balance sheet. That means that we're likely to be towards the lower end of that range, that 40% to 50%, so closer to the 40% like we're doing at this moment in time.

If you contrast that to the second bookend that I referred to, so at the low point in cycle, still looking for those compelling distributions. But of course, in that point, we're willing and able to lean on the balance sheet, and you've seen us do that. So we tend to be more at the higher end of the range or sometimes over it. You've seen us over the 50% as well.

But what's key to us on all of this is, as we've said, 40% to 50% of distribution of CFFO is sacrosanct through the cycle. And therefore, we need to keep pace with it. So that keeping pace with it, Lucas, is absolutely key. And of course, that's what we did this time. If we hadn't, of course, done a $5 billion, we would've been at the $3 billion, so that top of that extra two, we would've been closer to the 30%, et cetera. It's much more of an art than a science, of course, but that keeping pace is very, very key to us.

You did the second bit of it and you asked the question on just that how do we split between dividend and buyback. And again, I'll go back to art and science, but what I would say on that is we're of course not cautious about increasing the dividend. I look back over the last 12 months actually, and from that perspective, you see us go up 9% on the dividend as well. So we continue to view our shares as a very good opportunity to buy back, bit linked to that sort of intrinsic value that Wael already talked about earlier.

Thank you.

Thanks for that, Sinead, and thank you for the question, Lucas. I think what you've heard is we are trying to be as pragmatic and avoid being dogmatic on this, while recognizing, as Sinead said, this is art more than science. But hopefully, that gives you a perspective of how we think about that frame.

Matt, let's go to the next question, please.

Michele Della Vigna, Goldman Sachs.

Thank you, and congratulations on an exceptional quarter. I wanted to ask two questions related to two parts of your business.

First, on the trading stuff, I was wondering if you could give us a bit more visibility on your tanker portfolio, how much of that you've got locked in at long-term rates and how much you're paying on spot, given the extraordinary increase in freight rates we've seen in the last few months, and how this is likely to impact your realizations, but also probably on the positive side, your trading business in the fourth quarter.

And then second, coming back to the exceptional progress towards building resources and growth for the next decade, one country where you've got major resources is Nigeria, Bonga Southwest, Zabazaba, all waiting for FID. I was just wondering how the environment there is progressing and how effectively quickly you're progressing towards an FID there that could continue to contribute to an improved reserve replacement on your side. Thank you.

Thank you very much for those questions, Michele, and your kind words. I'm going to start with the Nigeria piece and then hand over to Sinead to talk about trading and particularly the freight rates.

We continue to be very encouraged by what the current Nigerian government is doing to be able to establish a much more stable environment for investment. Technically, Bonga Southwest continues to go well, and I really do hope that by next year, if all the stars align, we should be able to be in a position to choose to take a final investment decision.

You mentioned some of the other ones, Nnwa-Doro, Zabazaba, others are also progressing all at pace. And so far, I have to say I'm encouraged by what I see, both in terms of the quality of the resource, the stability that we're seeing above ground, and the improvement in the fiscals to be able to make these investable projects for the long term.

And of course, we have long-standing experience in Bonga in Nigeria. We have a very strong organization there. And we would like to be able to continue to leverage that to unlock future opportunities. So positive would be my summary of that, Michele.

Sinead?

Thank you, Michele. And indeed, with respect to the freight market, so certainly in unusual times, let me take you through three different elements of it, if you don't mind. First of all, of course, key is actually having access to vessels at the moment. Second would be in terms of the cost of the freight, and then third would be how does one trade around it. So let me take those three slightly separately.

In terms of access to them, as you know, we have one of the largest lease portfolios out there in the market. That's very advantageous to us in terms of being able to access vessels when we need them and access freight when we need them. That gives us the ability to move products where we need them to be or LNG or crude, but it gives us a distinct advantage there. So having those really locked in for us is key, which is what you're implying as well.

Second side of things is just cost. If you're into the market at the moment or if you have looking at spot rates, absolutely see costs going up. I don't think that's any surprise. Actually, we were talking about it earlier, just that route between sort of anywhere in the Middle East and China at the moment is some 10 times what it was from even just 12 months ago as well or in 2025, full stop. So you absolutely see that, and you see that starting to come into margins. We even see the pressure on our own side in terms of refining margins as well.

And the third side of it is your ability to trade around freight, so that risk management piece of things, whether it's on the risk management side or the trading side of it. We're very prudent in that side of things, but it's been quite advantaged for us. So if I take those three -- access, cost, and risk management -- number one and number three, it's certainly been helping us at this point in time. And of course, cost on anything which is spot is definitely going up and beginning to push down margins, whether it's on the refining side, the chemical side, or even on the oil side as well.

I hope that helps.

Thanks, Sinead. And thank you, Michele, for the questions.

Matt, let's go to the next question, please.

Biraj Borkhataria, RBC.

Hi. Thanks for taking my questions. I have two, please. Just the first one on Chemicals. There's been a lot of press around you shopping various Chemicals assets. We sort of know your long-term intentions in Chemicals are clear. My question is more around whether now is the right time to transact.

You obviously don't need to sell anything from a financial or balance sheet point of view. And when I look at Shell historically in the time I've covered it, I would say divestment timing, upstream, refining, and other has not been your strong suit. So maybe you can talk about the trade-offs between waiting and then transacting.

And then second, just a very quick one for Sinead on modeling. There's been a material lag in cash tax versus P&L this year. I assume that's just a function of lags and the direction of prices and how fast things can move. But is there anything to suggest that those two don't sort of equalize or normalize into 2027 in a flat macro environment? Thank you.

Biraj, thank you for those. Let me take the first one first and then ask Sinead to address the second one.

On Chemicals, maybe just to step back to the frame that you gave, our ability to be able to transact for value is what fundamentally is what we are trying to drive for, which is why when we talked about the Chemicals portfolio in CMD '25, we talked about 2030 timeline to avoid being in a window that we were looking to transact for the sake of strategic outcomes rather than for value. So while we've been very clear, and I hope both Sinead and I have been transparent throughout both for our own internal organization, of course, as we talk about this, but also externally, that we do not think we are the natural owners of these chemical assets and capabilities, that we will look to potentially find ways, whether it is through capital market transactions or sale of these assets to unlock value.

I think implicitly, you rightly said, you are Shell in a very healthy cash position. In my mind, that does not change the strategic context that we have talked about for Chemicals, but it also underlines the point you make, which is if we don't get the right deal we don't transact. We will transact for value.

Now, why do I have confidence that things are moving in the right direction? Firstly, our own self-help medicine is working. It's now two quarters of free cash flow positive. Monaca, which is of course the 800-pound asset in that overall mix, has been performing very, very well. We're building track record of performance for that asset. So I think that is a core part of this, and that's why we are taking the time to be able to demonstrate the quality of that asset. Margins have improved compared to where they were over the recent years, and we see more appetite for folks to be able to come in.

I think the last piece is the whole reason we kept flexibility in our approach around the transaction is for exactly the point you make. If we cannot find a mid-cycle set of margin conditions between us and the buyers, then the more likely outcome could be something where we combine portfolios, take equity interest in a minority equity interest in something else, and look to be able to ride the wave until we feel it's the right time to be able to monetize the asset.

So we come at this with a value lens first and foremost, and we'll look at what the opportunities in the market. We are in deep discussions. I won't comment on who and what at this stage other than to say we continue to progress those discussions and expect to do so in the coming months.

Sinead?

Thanks, Biraj. You're spot on in terms of the difference between what we're accruing versus what we're actually paying. So what you're seeing, of course, is Q3 taxes were higher paid than Q2 were, but you've got that rolling through. It's always got a bit of delay on it.

And in particular, of course, you have some phasing where places like Norway do it in typically towards December, et cetera, so you'll see that start to catch up as things go through. But it's just timing of price versus where the actual tax has been paid.

Thank you.

Thank you, Sinead, and thank you, Biraj, for the questions.

Matt, next caller, please.

Josh Stone, UBS.

Yeah, thanks. Good afternoon. Two questions, please.

One, coming back to the distributions, it was good to hear your logic earlier about the sort of cycle. I think in the past, you've talked about the consistency of your buyback program being a strength for a number of quarters and you did use the word top-up in your answer earlier. So to what extent is this decision to get $5 billion a sort of catch-up from cash flow you've already received or generated this year versus actually what is a signal for what could be future cash flow or future distributions looking into 2027?

And then second question on refining, very high utilization rates now for several quarters. It's quite impressive considering history. You've talked about greater integration with trading, I think, on the Gulf Coast. Are there some other factors you want to highlight there? And how should we think about implications for refinery maintenance and potentially as you look into 2027 and the turnaround schedule then? Thanks.

Good. Well, let me start with refining then and maybe have you, Sinead, address the piece around distributions. Thank you for the questions, Josh.

On refining, I'll start off by saying we put a challenge to our teams to rise to the occasion a couple of years ago on performance, and they have not disappointed. They have been -- this has been a long time in the works. They've been looking at a few things. First and foremost, how do we run these assets safely, so investing in the infrastructure, making sure that we are doing the maintenance, making sure that even at these high utilization levels, taking out certain units when we have the opportunity to do so, doing the proper maintenance. That's a baseline. That is a baseline in the way we work this.

I think secondly, the biggest single change, I think, has been the integration between our assets and our trading. Today, you effectively have our traders sitting in the asset with single-point commercial accountability for the entire value chain from feedstock purchase all the way to product distribution, responding to market signals such as, for example, today, it's more around diesel and kero, maximizing those cuts and looking to optimize margin.

We are now at records in our diesel production. Pernis, for example, in the Netherlands got a record just in August. Scotford in Canada got a record in jet kero production, so really getting the most out of these assets. And importantly, we are leveraging data and AI more so than we have ever done before, trying to anticipate where things are going to go wrong, intervening early, and mobilizing folks more and more into that space.

When we talk about performance, discipline, simplification, the work that the refining team, the manufacturing team has done, I think, has been stellar. I would say there is a lot more to do. We are not yet at where we need it to be. So there's more to still do. But having 99% utilization year to date, I think, speaks volumes of what the teams are looking at and how they're focusing on this.

Sinead?

Thanks, Wael. Thanks, Josh. So indeed, so let's take it for this quarter, first of all, and let's explain and unpack some of the thinking around this. Really strong cash generation this quarter and where did that come from? It was probably driven by three things mainly, I would say. So operational performance was very strong, great contribution from our trading colleagues as well, and then thirdly, some just very effective risk management came through. So those three things today drove that beat that we're seeing that's coming through.

You always hear us say that we look at cash in the quarter and then we look through the quarters, and that's really about looking to the macro and having to look forward. As a result of that, that means you can't be dogmatic, and Wael mentioned this earlier, you have to be quite pragmatic on it.

So as we think through that, we have to think about keeping pace with that 40% to 50% distribution, which is sacrosanct. And that meant we were very comfortable topping up from $3 billion to the $5 billion. And you spotted my use of the word top-up indeed, and it was thoughtfully given.

So whilst I wouldn't guide towards the fourth quarter in any way, I would say what we're trying to do is to always dampen the effect of the cycle and to give that 40% to 50% to our shareholders with some consistency, and we're building that track record. So when you look back at it and you look at how we've moved our distribution window or returns, we've gone from a 20% to 30% distribution to a 30% to 40% and then to a 40% to 50% distribution.

And actually, when I look over your tenure, well, what we've ended up doing is we've actually averaged 40% to 50%, i.e., in this part throughout that whole period as well. So you can see this consistency here, which gives you a good feel from where we are at the cycle and my earlier frame of what we would do at the top of the cycle and what we would do at the bottom of the cycle, Josh.

So I hope that's helpful.

Thanks, Sinead. And I think that point, Josh, around the consistency, I think, Sinead rightly alluding to, we're not saying consistency on absolute number. What we're saying is consistency in the approach and consistency in the philosophy to stay within the 40% to 50%, which means we will keep pace. We will keep pace to be able to stay within that range. And if it means topping up, we will top up above the $3 billion that we had over the last couple of quarters.

Thank you for the questions. Matt, can we go to the next caller, please?

Matt Lofting, JPMorgan.

Hi, everybody. My congratulations on the strength of the quarter.

3Q was another very strong quarter for Integrated Gas despite the impact on Shell's Qatari assets. In the macro conditions of recent months, are you effectively experiencing a degree of natural business hedge insofar as disruption and lost volumes in the Middle East ends up directly contributing to greater market-wide price dislocations and volatility, which the rest of Shell's business is ideally positioned to monetize?

And then second, I'd like to sort of come back to and extend on the comments, Wael, that you made earlier around energy security. In particular, is Shell beginning to see any signs that this year's volatility is stimulating a shift in customer behavior through rising appetite to sign up to long-term energy and LNG contracts, particularly with energy majors like Shell able to supply through diversified portfolios? Thank you.

Super. Thanks for that, Matt. Let me start with the second one and if you want to talk about the price dislocations.

I would say, too early, Matt, to sort of judge where the thinking that various countries will go to over the coming months, but there are some early bits and pieces we see. I think there is now a premium attributed to diverse sources of supply rather than banking on one supply. And the trade routes to get that supply now are much more into focus. So if you're sitting in Asia looking at what is my diverse basket of suppliers, looking through the trade routes and looking at the names behind that supply is becoming more and more important is what we see at the moment.

I think in addition to that, a recognition that storage, this whole we need to move from just in time to just in case is playing up more and more. People are talking about how do I build alternatives, how do I build more storage capacity, where do I need more pipeline capacity. And countries, I think, more and more are looking to build out their energy infrastructure, recognizing that their energy strategy is underpinning their digital strategy, their national security, it's underpinning their industrial and their economic strategy.

So at least in my time in this role, and I would argue in the past decade, I haven't seen as much attention to energy and energy systems as I have seen over the last year or so. That creates an opportunity to have good discussions, I think, around what is sensible and how does one start to navigate the space. And a company like Shell that plays across different energy forms, that has the integrated nature of our business, I think positions us well to be able to have these dialogues.

Canada is a super example of that. If you just look at our investments in Canada over just the last few months, how stitching up those different value chains can really create support to a government agenda that is clear in its direction around energy for domestic and for export purposes.

I think they link very closely, Wael, actually. So I mean, where you're going to, Matt, is specifically around how does an integrated company manage to benefit from this sort of environment, and it's exactly as you say, Wael. So what are we seeing? Of course, we continue to see, with what's happening in the Strait, the impact on particularly our Integrated Gas business at the moment. So in terms of both on Pearl and the inability to be able to get product out, but also on some of the LNG there as well, which will play into Q4 as well. So that's not something that is just going away at any point in time.

On the other side of things, what we are trying to do and what we're really focused on and the teams are being driven to is to ensure that they maximize throughput through all of the assets that we have so we get that length. What is unusual about Shell, of course, is that you have not only a great asset base, but you also have a range of different businesses which are not just specifically dependent on oil price.

So we have both our mobility business which, of course, will depend on some margins but actually has breadth beyond that. Lubricants, of course, which unfortunately with Pearl done, is being impacted at the moment, but typically would be able to provide some of that hedge that comes through as well.

But our Upstream business is, as you say earlier, Wael, is actually managing to benefit and get as many volumes out as possible. One of the examples we saw, of course, was when the hurricane came through, the recent one in the Gulf of America, we were able to still produce from a couple of our assets, and that was done through remote production at lower levels. But that's the sort of thinking that is driving our ability to be able to ensure we continue to deliver with that implicit hedge across those businesses.

And last, but not least, of course, having trading sitting in the middle of it means that we're able to actually focus on what do they need given where the market is. But regardless, yeah, I mean, we'll see it play through in Q4. We'll have hurricanes still coming through. We won't have Pearl up and running yet as we've just talked about. It's really into Q1. So there will be some headwinds as well as the benefits that are truly integrated with business.

And let me maybe just -- I know you didn't ask this question, Matt, but just building off Sinead's point, and I think you intimated it in your question. So on Qatar, what's important to recognize is we're starting to see, on the Pearl GTL side, we have partially restarted one of the trains. Don't expect much in terms of cash flow earnings at this stage. We're filling up the inventory there.

And to your point, Sinead, one of the remarkable things that the team has shown is they've been able to build essentially a land bridge across multiple countries to transport base oil that is the feedstock of our Lubricants business, the differentiated lubes that we have, and to be able to still continue to keep our customers satisfied through that. But that's an example of the resilience that the team has shown.

The second train that was impacted is continuing to be on track to be ready for start-up. Of course, subject to the Strait of Hormuz opening and our ability to evacuate product, that's still planned for late in Q1. And so progress there, under very difficult conditions, of course.

Thank you. If I can go to the other Matt now and ask for the next caller, please.

Fergus Neve, Rothschild & Co Redburn.

Good afternoon, everyone, and thank you very much for taking my questions. Just a couple, please, if I might.

Firstly, with the ARC transaction now closed, what operating and cash flow milestones will you be looking to over the next year or so to demonstrate that the acquisition is delivering on the returns you outlined on announcement? And how much additional value do you see LNG Canada Phase 2 unlocking beyond the original kind of guidance given now that FID has been taken?

And then secondly, a quicker question. Could you just comment on the refining margins that you are seeing quarter to date and how the indicator has been performing? Thanks.

Sinead, you led the ARC transaction. Do you want to say a few words and maybe also cover the refining margins?

Absolutely. With respect to ARC, what are we seeing, it's one month into the portfolio. So what have we seen so far, we've seen great talent coming through. Really fascinating to be able to take such talented individuals and put them with our teams as well to be able to understand not only what we can deliver from ARC, but also what we can deliver from some of our own assets up in Canada as well and be able to take the learnings from both sides.

So very early days on that one, Fergus, as we work through, but holding the team to account to be able to deliver on exactly what we had premised as we went through. Looking forward to being able to give you a bit of an update in terms of that probably in Capital Markets Update or probably middle of the year, but we'll make sure we go into some detail there as well.

You also asked about LNG Canada Phase 2. Of course, FID just recent, so really pleased on how we were able to get to that with all of the partners. Of course, a very different scenario where we were able to see much more competitive pricing from the contractors. And much more comfort because this is not a new plant that has been built. All of the facilities, et cetera, are there. This is about an add-on to something that is already there. And that makes it quite exciting to see how much we could actually return from that. Of course, the 6 million tonnes, et cetera, really good options to be able to push forward at the right time when it comes through, but let's start to build on that.

Your second point, of course, was around refining margins and how are those performing. So what we did see in terms of October and in terms of the integrated refining margin, we saw come down a little bit relative to where it was for Q3. We do believe we could see lower realized numbers coming through this quarter, given the freight rates, which was one of the questions, of course, earlier that came through as well. So that will start to play out. But again, early days just into the quarter, and looking forward to, per my answer earlier from the team, the ability to be able to maximize value from freight on our side.

And it's fair to say we'll give a bit more detail on ARC. I think part of your question, Fergus, was almost what's the upside to LNG Canada Phase 2 FID. We didn't bang that into our premise, into our thesis for the ARC acquisition. That will be upside, but we'll talk more about ARC value and the like when we get to Capital Markets Update, so let's hold that until February.

Matt, let's go to the next question, please.

Doug Leggate, Wolfe Research.

Thank you. Good morning, good afternoon, everybody.

Wael, there's been a lot of portfolio changes, quite remarkable actually the progress you've made, but there's also quite a lot of speculation about future portfolio changes. I wonder if you could speak to a couple of those, specifically Infineum and Chemicals. But more importantly, if there were material proceeds to come in, what's your priority for the use of those proceeds? That's my first question.

And my quick follow-up is for Sinead. I just wonder, Sinead, if you could speak to the trend in leases. I think at the Capital Markets Day, you had suggested that the pace of lease additions would slow, and obviously it's continued to increase. So any color you can offer there, that'd be great. Thank you.

Doug, thank you for that. Let me take the first one, and then Sinead will address the second one.

Maybe just to step back, so what did we say in Capital Markets Day when we outlined our strategy? We said there are three things we're trying to do. One is we want to sustain liquids. Two is we want to grow our Integrated Gas, in particular, our LNG business. And three, we wanted to continue to lean into this sort of confluence of marketing and trading as we position ourselves for value creation longer term.

And I think to your point, we've made progress across all of these three, whether it's on the sustained liquid and potentially grow liquids as the opportunities come through. ARC, of course, gives you an underlying amount of liquids that's going to really support us for a long, long time to come. We are really focused on competitive recovery of our existing resource base. And again, we'll update you a bit more on how that looks in February.

We've touched on the example of Bay du Nord. Michele asked earlier the question around Nigeria. So there's a lot that's coming through, but again, with a focus on value rather than volume here. That is the key thing that I've been saying to my organization. We're not in the business of just adding resource for the sake of it. We want to be able to add resource in areas where we have differentiated skills, where we can really create value because of our knowledge and capabilities, and that are really accretive and in line with our returns expectations.

Then if I move to Integrated Gas, we've talked about LNG Canada Phase 2 and our ability to grow through that. ARC, of course, underpins it. That's before we get NFE and NFS in Qatar, before we get Nigeria Train 7. So that business continues to go from strength to strength. And most importantly, we continue to add dimensions for our trading and optimization teams to be able to maximize value from.

And Tri Star is a great example of what we talked about on the marketing trading side, and these are areas where we will look to continue to grow. And so we are just executing the strategy that we said, but we're just beginning that execution as we've now really driven the performance that, I think, is an underpinning for any portfolio moves that anyone needs to make. Otherwise, why would we be the natural owner of some of these resources?

On Infineum and Chemicals, of course, I won't talk to media speculation and the like, but it goes back to the earlier question. At the heart of it, we think Chemicals is a business that is great for others, but we are not the natural owners. So the different elements of our portfolio that sit within the chemicals space, we will look to either sell or do these capital market transactions around.

When it comes to what do we do with the proceeds, I won't speculate at this stage. What I will say is just reinforce what Sinead talked about. 40% to 50% through the cycle, and that's through the commodity cycle, not the calendar cycle, is sacrosanct for us. We will always aim to keep pace, and you have seen us top up when we feel that we are starting to sort of fall below the 40%.

We are not structurally going to accept to be at the 30%s. We want to move through that cycle into the 40% plus into the 40% to 50% range, and as Sinead said, ideally be at the top end of that cycle in softer elements of the commodity cycle and towards the bottom end at high points as we see right now. And the proceeds from these investments or other divestments will come onto the balance sheet and we will then make sure that we are allocating them accordingly.

Maybe the last point I will make, because I recognize our cash generation has meant that we can strongly deleverage, that we can continue to invest in our business as we've announced some of the investments that we have made and continue to distribute to our shareholders. But we're not done. We still have a lot we think we can unlock from this business, and we will continue to do that.

But we will be disciplined. We're not constrained. I think everyone recognizes that, but we will be disciplined. We will not allow the surplus cash to burn a hole through our pockets. That is the flaw that we have seen historically in our sector, in our company. And this time, we have learned our lesson and we will really be very methodical in making sure that we will make those investments in areas where we see risk-adjusted returns that are acceptable to us because we will keep high-grading our capital allocation to make sure we create value long term.

Sinead?

On this one -- on the leases, Doug, you know how we use leases. So leases for us are very much by creating value. They tend to be typically in FPSOs linked to our freight, some movement of product, whether that's on vessels or whether that's rail cars, et cetera, and some around convenience sites. Those tend to be where the leases sit.

So per your point, why have they gone up versus what we said in Capital Markets Day? Two things really. Number one, ARC wasn't in the numbers at that time, so that's about an acquisition that came on the books. Very happy to have those leases. Great ability to be able to transport those volumes where they need to be and extract value.

And secondly, it's a non-cash item on the other one, which is linked to freight, which is really, with where the market is going, it's just the accounting treatment of those. So it brings it up this quarter in particular, non-cash. If the Strait and when the Strait begin to stabilize, we would expect it to ebb and flow with that as well. I'll keep it there.

Thanks, Doug.

Thank you, Sinead. Doug, thank you very much for those questions.

Matt, can we go to the next caller, please?

Martijn Rats, Morgan Stanley.

Yeah, hi. Hello. Maybe I can just ask two smaller modeling questions just to sort of take them off.

I wanted to follow-up slightly on Doug's question about the leases. Because this quarter, there was a big boost in leases from escalating freight rate. That makes a lot sense. If you sign contracts that have a sort of variable component that scale with freight, then of course, the present value of all future freight payments is higher and thus capitalized on the balance sheet. But I was wondering about that because the number in billions is reasonably material.

I was wondering whether when you do these calculations, is that a matter of to say, well, freight rates are up and we now assume that for the remaining duration of the lease, the rates will stay where they currently are because that is the rate that's in front of us and that's what we assume? Or a lot of freight rates also have forward curves and these forward curves are heavily backward dated that will tell you that the market expects the freight rates to come down? Is the extra amount that is now capitalized in leases assuming a sort of shorter spike in freight rates and takes into account that these forward freight rates are so heavily backward dated already?

Of course, the reason why this is important is that these rates do not come down. We could still see the same sort of upwards provisions to these leases sort of in the future, depending on the calculation. So I hope I made my point clearly, but it's a little difficult to explain. But you probably see what I mean. I was hoping you could address that.

And the other one I also wanted to ask is about this sort of $3.4 billion derivative inflow, when that reverses, if it reverses. If you can give a bit more color on that.

Super. Thanks for that, Martijn.

Martijn, I could go on a very long rant about accounting and how we have to handle it around IFRS. You're spot on. Just the way it gets accounted for is the fact that we actually have to use the spot rate as an indicative of where it goes to through the life or the tenure of the leases, which is something that I think it's not just us. You've seen some of the trading houses object to this and make comments on it as well. Deeply frustrating.

But per your point, does it mean it goes up and down? Yes, it does. That's why you heard me say to Doug in particular, this is about the accounting treatment of it, not the economic value of it, so two very different things. And of course, given that we have quite a large freight book, you can imagine that we use risk management and different things like that. So this is the accounting side of it. But you're spot on, and I hear your frustration and I echo it is what I would say.

Your second one is on $3.4 billion of inflow. And specifically, that's around derivatives, as you said, coming through. What I would say on that is a number of elements in there, but you heard me allude to the fact earlier that there were three things that I was really pleased with in terms of the cash generation. One was around the operational performance of the company. Secondly, it was higher -- our trading business had or trading segment business had performed, and the third one was around effective risk management.

So that comes down to the effective risk management, and that's what you're seeing on the derivatives coming through. Will there be ebbs and flows in it? Absolutely. We do have margining moves, but I would say the way we do risk management means it is something that's normal course of business for us. So you tend to see that come through, which is why I didn't call it out specifically.

Thanks.

Thanks, Sinead, and thank you, Martijn.

Matt, let's go to the next caller, please.

Christopher Kuplent, Bank of America.

Thank you very much. Well, I've got one question on M&A. You were telling us not so long ago that you're spending an increasing amount of time on what's coming through your desk. What are your senses telling you right now? Obviously, during these kind of volatile commodity price periods, it's very hard to find deals. You managed to do that earlier this year. So are you still confident that this is a good time to transact, or are you telling your team what -- there's always time?

And second question or I just wanted to give you a bit of an opportunity with the benefit of hindsight, we're all smarter to sort of review what you've learned from the trimming of the buyback back in April relative to the top-up right now. Thank you.

Thank you, Christopher. A couple of good questions, let me address those maybe on the M&A side.

What I'm particularly pleased, and I've said this before and I'll reiterate now, is the teams are looking to continue to drive value from our existing portfolio first and foremost and focus on the areas where we have competitive strength. That means that M&A is nice if it comes. And recognizing we hold ourselves to a very high bar, even if we look at 100 of these companies, it's very rare to get even one of them sort of screening through, and indeed, ARC met that high bar.

If I'm honest with you, I don't see an obvious target at the moment that's meeting that high bar. We, of course, will always look, by the way, and I'll never say to my team, stop looking because I think part of our job is to make sure we are creating various alternatives. What's the opportunity cost of every single dollar of capital we're spending, whether it's an exploration, whether it's in a negotiated deal, organic opportunities, M&A, to keep us on our toes and make sure that we are allocating capital to that best risk-adjusted return opportunity that's out there.

So we will keep looking. Nothing that's particularly, I'd say, exciting. But who knows? Opportunities will emerge in these locations. As I said earlier, we will be -- we are not constrained, but we will be very disciplined in that regard.

On the -- sorry. Please, of course, yes.

I think you answered it earlier as well. Very happy to.

Christopher, I think it's crystal balls in hindsight. I don't think there's many things we would look at and consider with a different viewpoint. We've been doing this for some time, and you can't always time it perfectly I think is what you were referring to earlier as well. I think our view at the time was trying to understand how long the disruption in the Middle East was going to last. And I think it's fair to say it's a difficult one to bet on or to decide when it would come through.

We took the opportunity at that time, of course, to rebalance as well and to be able to look at both the buyback but also to move some towards the dividend at that time as well. As well, you talked about earlier, we keep increasing the intrinsic value of the company, and if we keep doing that, we still see it as a good value to buy. I think, Christopher, you actually raised it last time. I think we've bought back some 30% of the company over the last few years at very good value and we're continuing to do that.

So continue to feel that joy of the fact that we view the underappreciation in terms of that turnaround story of this company, in terms of the performance lens that's coming through, the portfolio changes that are coming through, and more importantly how we're strengthening the portfolio to the future. So I'm very much looking forward to sharing that with you at the Capital Markets Update as well. A good opportunity to do it.

Indeed. I think we don't have wisdom around where these prices are going, but what we can do is make sure that we honor the frame that we have set, the 40% to 50%, and we do all we can around the areas that we can control. So those are the fundamentals, Christopher, and hopefully, we can keep demonstrating that with the consistency that this organization has done quarter after quarter.

Let's go, Matt, to the next question, please.

James West, Melius Research.

Hi, guys. Thanks for getting me in here towards the end. We've covered a ton of ground today and then the Q&A session. And obviously, there's been a lot of moving parts really, well, since you took over the last three years. But what are the areas that's becoming more interesting and not just -- well, I guess probably because of the changes in government there and the backing of the US government is Venezuela and the gas opportunity in that market. I know you're familiar with the market. You have some exposure. How are you thinking about that opportunity set and how that feeds into your broader global gas strategy?

James, thank you for that question.

I think what we're seeing at the moment, I'll touch on Venezuela in a second, is there are multiple opportunities that are playing up. Maybe sort of finishing the thread that we started with Christopher, M&A is one angle, but there's more and more opportunities for negotiated deals, whether that's potentially in Kuwait, in Libya, in Iraq, or in Venezuela. And that's been exciting to lean into.

The question is, what are the ones where we can truly bring value? And in a place like Venezuela, of course, heavy oil is what people talk about. It's not obvious to us how we can add a lot of value in that space. But in the gas value chain, that connectivity between, in particular, offshore Venezuela, where we can put in new assets or not having to inherit legacy gas assets, where we can symbiotically tie those assets into our existing infrastructure on the Trinidad side of the border, where we can leverage the existing capacity in the Atlantic LNG, all of that means we can truly create value out of those unique opportunities from positions of strength.

We will look at that. I mean, the ARC into LNG Canada Phase 1 and 2 is another example of that. And our opportunities in Australia to be able to keep our Queensland LNG facilities full are all that. I think we're in a world where continuing to leverage the diverse supply sources we have to be able to meet that growing demand for LNG is going to be key.

Okay. Matt, let's go to the next question, please.

Kim Fustier, HSBC.

Hi. Good afternoon. I've only got one question left. You've trimmed your 2026 cash CapEx guidance by $1 billion to $23 billion to $25 billion, and that's despite completing ARC and then sanctioning a major project, LNG Canada Phase 2. How much of that reduction came from timing versus real capital efficiencies or lower underlying spend? And then is there any read across of that into the $20 billion to $22 billion annual CapEx framework for '27 and '28, either on the upside or the downside? Thank you.

Thanks, Kim. I can be relatively short on this one actually. So indeed, we brought it down by roughly $1 billion. A large part of that is really timing and phasing with a few efficiencies built in. So it's a bit of a blend in there.

In terms of the read-across, I think the only thing that I would say is really, Kim, we've talked about the fact that we will absorb ARC into our existing CapEx guidance. We still believe that that is true. So looking forward to giving you a bit of an update as we come into Capital Markets Update, which is linked to our Q4 results. So we'll be able to talk to you and unpack that in a bit more detail, but teams are doing great work at the moment in terms of both discipline and just thinking of where to spend the money.

So thank you.

Thank you, Kim, and thank you, Sinead. And thank you all for your questions and for joining us in today's call.

In conclusion, we delivered a very strong set of financial results in this quarter, thanks to our strong operational performance in a volatile macro environment and our continuing focus on performance, discipline, and simplification across all our businesses. We look forward to sharing more about the progress that we've made at our Capital Markets Update, which will take place on February 4.

We wish everyone a pleasant end of the week. Thank you again.