Shell plc (SHEL Quick QuoteSHEL - Free Report) , the London-based energy giant, flagged a non-cash impairment charge of $2.5-$4.5 billion for the fourth quarter on Monday. These charges primarily stem from the Singapore refining and chemicals hub, for which the company has recently expressed its intentions to sell.

The company attributes this charge to a combination of macroeconomic factors, external developments and strategic portfolio choices. Notably, the decision to sell its Singapore Chemicals & Products assets is a significant contributor to this impairment charge. The assets encompass a substantial 237,000 barrels per day (bpd) refinery and a 1-million metric ton per year ethylene plant located on Singapore's Bukom and Jurong islands. Shell had disclosed a strategic review for these facilities in the preceding year.

Despite the impairment charge, Shell expressed optimism about its quarterly performance. The integrated gas trading and optimization sector is expected to see a substantial increase from the previous three months’ level. Additionally, the company forecasts a production range of 880,000-920,000 barrels of oil equivalent per day (boe/d) from this unit. In the upstream business, Shell expects production in the band of 1.83-1.93 million boe/d for the fourth quarter. These forecasts indicate a resilient operational performance.

LNG volumes for the fourth quarter are anticipated to range between 6.9 million and 7.3 million metric tons, up slightly from 6.9 million metric tons recorded in the previous quarter. Shell had initially projected a range of 6.7-7.3 million metric tons.

The energy giant is scheduled to release its financial results on Feb 1. While the company is optimistic about its integrated gas trading and production segments, it cautions that the chemicals and products segment is expected to report an adjusted earnings loss for the December-ended quarter. The decision to sell the Singapore Chemicals & Products assets aligns with Shell's ongoing efforts to optimize its portfolio and focus on core business areas.

Zacks Rank & Key Picks

Shell currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Sunoco LP (SUN Quick QuoteSUN - Free Report) , The Williams Companies, Inc. (WMB Quick QuoteWMB - Free Report) and Murphy USA, Inc. (MUSA Quick QuoteMUSA - Free Report) . While Sunoco sports a Zacks Rank #1 (Strong Buy), both Williams Companies and Murphy USA carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sunoco is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. By distributing more than 10 fuel brands via 10,000 convenience stores under long-term distribution contracts, the partnership will continue to generate stable cash flow. 

SUN’s earnings beat estimates in two of the trailing four quarters and missed twice, delivering an average surprise of 28.33%.

The Williams Companies is well-positioned to capitalize on the anticipated substantial long-term growth in U.S. natural gas demand, thanks to its impressive portfolio of large-scale projects that create significant value. The company’s debt maturity profile is in good shape, with its $4.5-billion revolver maturing in fiscal 2023.

WMB’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 13.68%.

Murphy USA is a low-cost, high-volume fuel seller, whose stations are located near Walmart supercenters. This enables the company to attract significantly more transactions than its peers. MUSA’s sourcing infrastructure is another key competitive advantage.

MUSA’s earnings beat estimates in two of the trailing four quarters and missed the same twice, delivering an average surprise of 7.04%.