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.

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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.

REUTERS