LONDON (Reuters) – Royal Dutch Shell (L:RDSa) on Tuesday said it will write $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 CEO 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 $126.5 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 $15 to $22 billion in the quarter.
Shell’s shares were down 0.4% in early trading.
The world’s largest fuel retailer said it expects a 40% drop in fuel sales in the second quarter from a year earlier to 4 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.
Graphic: Shell Q2 fuel sales https://fingfx.thomsonreuters.com/gfx/ce/gjnpwwakypw/Pasted%20image%201593497604954.png
Shell’s writedown mirrors rival BP (NYSE:BP)’s move to take up to $17.5 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 $35 a barrel, down from $60. For 2021 and 2022 it cut its forecast to $40 and $50 a barrel, respectively, also down from $60.
Its long-term oil price outlook now stands at $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%.
Its long-term natural gas price was set at $3 per million British Thermal Units.
BP cut its long-term Brent forecast to $55 a barrel from a previous $70.