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Shell to write down as much as US$22b in wake of coronavirus
[LONDON] Royal Dutch Shell on Tuesday said it will write US$22 billion off the value of its assets after sharply lowering its oil and gas price outlook in the wake of the coronavirus pandemic.
The decision also comes as the Anglo-Dutch company reviews its operations after chief executive Ben van Beurden laid out plans in April to reduce greenhouse gas emissions to net zero by 2050.
Shell, which has a market value of US$126.50 billion, said in an update ahead of its second-quarter results on July 30 that it will take an aggregate post-tax impairment charge in the range of US$15 billion to US$22 billion in the quarter.
Shell's shares were down 0.4 per cent in early trading.
The world's largest fuel retailer said it expects a 40 per cent drop in fuel sales in the second quarter from a year earlier to four million barrels per day (bpd) due to a sharp fall in consumption due to coronavirus-related travel restrictions.
Upstream oil and gas production is expected to average 2.35 million bpd in the second quarter, down from 2.71 million bpd in the previous quarter.
Shell's writedown mirrors rival BP's move to take up to US$17.50 billion off the value of its assets as it prepares to shift to low-carbon energy.
Shell reduced its expected average benchmark Brent crude oil price for 2020 to US$35 a barrel, down from US$60. For 2021 and 2022 it cut its forecast to US$40 and US$50 a barrel, respectively, also down from US$60.
Its long-term oil price outlook now stands at US$60 a barrel, Shell said in an update ahead of its second-quarter results on July 30. It previously did not disclose its long-term value.
The company also cut its long-term refining profit margin outlook by 30 per cent.
Its long-term natural gas price was set at US$3 per million British Thermal Units.
BP cut its long-term Brent forecast to US$55 a barrel from a previous US$70.