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Shell warns of a $2.0 billion tax hit in the current quarter

on Jan 6, 2023
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  • Shell expects $550 million to $750 million loss in its fourth quarter.
  • GERDES Energy Research initiates Shell stock with a "buy" rating.
  • Shares of the oil giant are up 20% versus its low in late September.

Shell plc (LON: SHEL) is in focus on Friday after it said the new levies in European Union and the United Kingdom could result in a $2.0 billion tax hit in its fourth quarter.

Shell to report Q4 results in early February

In September, EU said the fossil fuel companies will pay an additional tax on surplus profits in 2022 and 2023.

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Weeks later, the U.K. also imposed a 35% levy on their windfall profits through March, 2028. The government expects this tax to bring in over $40 billion over the said period.

Energy companies noted a sharp increase in revenues last year as the West moved to shun Russian supply in response to its atrocities in Ukraine.

In the third quarter, Shell reported a more than 100% increase in its adjusted earnings to $9.45 billion that saw it raise its per-share dividend by about 15% for Q4. Versus its low in late September, Shell stock is up over 20% at writing.

What to expect from Shell’s fourth quarter

Shell is scheduled to report its fourth-quarter results on February 2nd. Citing the new taxes, it guided for $550 million to $750 million in loss this morning.

According to the London-headquartered firm, its LNG volumes likely slipped to between 6.6 million and 7.0 million metric tons in the current quarter as two of its Australian facilities faced longer-than-expected outages.

Nonetheless, it expects a meaningful sequential growth in its fourth-quarter LNG trading results. Oil products trading, though, will likely be significantly lower than the previous quarter, Shell added.

Earlier this week, GERDES Energy Research initiated the Shell stock with a “buy” rating and said it had upside to $74. That represents a 30% premium on its current price.