Shell (NYSE:SHEL) signaled a challenging end to 2025, warning that its chemicals business will likely fall below break-even despite maintaining steady output in its core oil and gas segments.
In a trading update ahead of its full February results, the energy giant highlighted a convergence of weak margins and significant cash outflows in Europe.
While the company’s upstream production remained resilient—forecasted between 1,840 and 1,940 thousand barrels of oil equivalent per day—the downstream environment proved more volatile.
Indicative refining margins improved slightly to $14 per barrel, but chemicals margins softened to $140 per tonne.
Consequently, the Chemicals & Products segment is expected to post a loss, exacerbated by a significant non-cash deferred tax adjustment within a joint venture.
Cash flow is also set to face temporary pressure from Germany.
Shell flagged an approximately $1.5 billion outflow related to the timing of German emissions certificate payments, alongside a typical $1.2 billion mineral oil tax payment.
Together, these total nearly $2.7 billion in anticipated Q4 cash movements.
Integrated Gas, a perennial profit driver for the London-listed firm, remains a point of relative stability.
Production is expected to land between 930 and 970 kboe/d, with LNG liquefaction volumes projected at 7.5 to 7.9 million tonnes, roughly in line with previous performance.
Investors are now looking toward the February 5 release for clarity on whether the company will maintain its aggressive share buyback pace amid these headwinds.