Shell sees up to $4.5bn in Q4 write downs on Covid-19 impacts

Royal Dutch Shell on Monday said it was writing down $3.5bn - $4.5bn in the value of its oil and gas assets next year as it assessed the current impact of the coronavirus pandemic on fourth quarter operations.

The energy giant said the post-tax charge was due in part to impairments on its Appomattox field in the US Gulf of Mexico, the closure of refineries and liquefied natural gas (LNG) contracts.

In an update ahead of fourth quarter results on February 4, Shell guided for oil and gas production to be around 2.275m - 2.350m barrels of oil equivalent per day, reflecting the closure of platforms in the Gulf of Mexico due to hurricanes and mild weather in Northern Europe. It added that adjusted upstream earnings were expected to show a loss in the current price environment.

Oil refinery utilisation was expected to be 72% - 76% of capacity, while marketing results, which include contributions from its petrol stations, were expected to be in line with the fourth quarter of 2019 “while significantly lower compared with the record third quarter 2020 due to lower volumes driven by seasonal trends”. The division posted record profits in the third quarter.

LNG liquefaction volumes were expected to be 8m - 8.6m tonnes, while fuel sales from the world's largest retailer, were forecast at 4m - 5m barrels a day in line with the third quarter.

Oil and gas trading profits were also set to decline sharply in the fourth quarter from the previous three months, the company said.