- Oil major Shell says it is writing down the value of its assets by up to $US22 billion as it adjusts to oil’s historic crash in recent months.
- Shell said it expects oil prices to level at $US50 a barrel in 2022, versus an initial prediction of $US60 a barrel.
- Earlier this month, oil major BP slashed its valution by almost $US18 billion.
- Oil prices tumbled in March due to a price-war between Saudi Arabia and Russia, and fell further thanks to a lack of demand due to COVID-19.
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Oil major Shell will slash up to $US22 billion of the value of its assets as the company copes with falling oil prices.
In a second quarter update, the oil major said on Tuesday: “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.”
Shell said aggregate post-tax impairment charges in the range of $US15 to $US22 billion are expected in the second quarter.
This is the breakdown of the write-downs Shell expects:
- Integrated Gas: $US8-9 billion.
- Upstream: $US4-$US6 billion
- Oil Products: $US3-$US7 billion across the refining portfolio.
BP said its transformed price outlook is based on the likelihood of a global transition toward carbon-efficient fuels leading to a “Paris-consistent world” – referencing the Paris climate agreement – and the ongoing impact of the pandemic.
Shell said it now expects oil prices to level at $US50 a barrel in 2022, versus an initial estimate of $US60 a barrel.
The company said it will take until 2023 for long-term oil prices to level at $US60 a barrel, and gas to trade at $US3.
Brent oil, the international benchmark is currently trading at around $US41 per barrel.
Oil prices tumbled in March when Saudi Arabia kicked off a price-war with Russia, and fell further due to lower demand during the pandemic.
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Prices have recovered since OPEC production cuts have taken place, but both benchmarks are still well below their historical levels.