Shell: Low Oil Prices To Lower Asset Value Up To $22B

Royal Dutch Shell announced Tuesday that the current low oil price environment could lower the value of its assets by up to $22 billion in the second quarter of 2020.

The Anglo-Dutch energy giant said it estimates the price of Brent crude oil to average $35 per barrel this year, and $40 a barrel next year, down significantly from the average of $64 per barrel in 2019.

"Given the impact of COVID-19 and the ongoing challenging commodity price environment, Shell is announcing today a revised long-term commodity price and margin outlook, which is expected to result in non-cash impairments in the second-quarter results," the firm said in a statement.

As a result, the company expects a write-down, a reduction in the estimated value of its assets, of up to $9 billion in integrated natural gas mostly in Australia, up to $6 billion in the upstream sector largely in North American and Brazilian shale plays, and up to $7 billion in oil products across its refining portfolio.

After oil prices started to plummet in March 2020 with the novel coronavirus (COVID-19), Shell posted a net loss and revenue decline in the first quarter.

In the January-March period of this year, the company's revenue fell 28.3% to $60 billion, from $83.7 billion in the same period of 2019, while the average price of Brent crude fell to $50 per barrel from $63 a barrel during that period.

Shell announced on April 16, 2020, that it targets to become a net-zero emissions energy business by 2050 or sooner, by reducing the carbon footprint of its energy products by around 30% up to 2035, and approximately 65% by 2050.

Although this ambitious goal aims to make Shell less reliant on oil and gas resources, it could become harder for the company to achieve it with a revenue decline.

Shell will release its second-quarter 2020 financial results on July 30.

Another oil giant - the UK's BP also announced on June 15 that it anticipates write-offs in the second quarter of 2020 in the range of $13 billion to $17.5 billion due to "... the prospect of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a sustained period." -