Shell to Book $15 Billion-$22 Billion Impairments After Lowering Oil and Gas Price Forecasts -- Update
--Shell expects to book $15 billion-$22 billion in impairments,
reflecting lower oil and gas price estimates and refining margin
--Similarly, industry peer BP had said earlier this month that
it expects $13 billion-$17.5 billion in impairments after lowering
its own projections on oil and gas prices.
--Shell sees lower production across both its integrated gas and
upstream divisions in the second quarter.
By Jaime Llinares Taboada
Royal Dutch Shell PLC said Tuesday that it expects to book
post-tax impairments of between $15 billion and $22 billion in the
second quarter after it revised down its oil and gas mid- and
long-term price expectations.
The British-Dutch oil giant said the revised commodity prices
and refining margin outlooks reflect the expected effects of the
coronavirus pandemic and related macroeconomic developments, as
well as energy market demand and supply fundamentals.
Shell now sees the long-term Brent oil price at $60 per barrel,
and the Henry Hub gas price at $3.0 per million British thermal
units. In addition, average long-term refining margins have been
lowered by around 30%.
The company said $8 billion to $9 billion impairments are
related to its integrated gas division, while $4 billion-$6 billion
relate to the upstream business, and $3 billion-$7 billion to the
BP PLC said on June 15 that it anticipates second-quarter
impairments of between $13 billion and $17.5 billion after revising
down its own oil and gas price forecasts.
Shell also said it expects production of between 880,000 and
910,000 barrels of oil equivalent per day from its integrated gas
business in April-June. This would mark a fall from 927,000 barrels
a year earlier. Liquefied natural gas, or LNG, volumes are also
In addition, Shell warned that it will start to see the impact
of lower oil prices on its oil-indexed LNG supply contracts from
June onwards, and will book additional gas well write-offs of $250
million to $350 million in its second-quarter results.
Production across its upstream business is expected at between
2.3 million and 2.4 billion barrels of oil equivalent per day. This
would also be lower than 2.7 million barrels in the second quarter
of 2019, but better than previously forecast, the company said.
Moreover, Shell anticipates receivables and inventory provisions
to hurt second-quarter earnings by $200 million-$400 million, and
said that it will book a $500 million cashflow impact related to
the Lula unitisation settlement in Brazil.
Shares in London at 0739 were down 16.8 pence, or 1.3%, at 1,254
Write to Jaime Llinares Taboada at firstname.lastname@example.org;
(END) Dow Jones Newswires
June 30, 2020 03:56 ET (07:56 GMT)
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