By Ron Bousso and Shadia Nasralla
LONDON (Reuters) – Royal Dutch Shell avoided its first quarterly loss in recent history, helped by a booming commercial business, but announced nearly $ 17 billion in impairment charges reflecting a gloomy outlook for oil and gas prices .
Shell warned last month that it would reduce the value of its oil and gas assets by as much as $ 22 billion as the coronavirus crisis reduced energy demand.
“Shell has delivered resilient cash flow in a remarkably challenging environment,” CEO Ben van Beurden said in a statement Thursday.
However, the Anglo-Dutch company warned of the pandemic’s continued impact on oil and natural gas prices and sales in the third quarter.
Shell and its peers have historically withstood recessions thanks to their large refining operations, whose profit margins are driven by lower crude oil prices and increased fuel demand.
But in this crisis, the drop in oil and gas prices was coupled with an unprecedented drop in world demand.
Shell has responded by cutting its dividends for the first time since World War II and slashing planned spending by $ 5 billion to as high as $ 20 billion this year.
It booked an overall impairment charge of $ 16.8 billion in the quarter after narrowing its outlook for oil and gas prices in the short term in the wake of the epidemic. The charge is at the bottom end of your previous guide.
Shell shares rose 0.2% in early trading.
COMMERCIAL OVERVOLTAGES
Global movement restrictions to limit the spread of the coronavirus have reduced energy demand, with Brent oil benchmark prices falling below $ 30 per barrel in the second quarter, a reduction of more than half from the last year.
Shell’s adjusted second-quarter earnings, which exclude specialty items and adjust to cost of supply, fell to $ 600 million from $ 3.5 billion a year ago, beating analyst expectations of a loss of $ 674 million.
The earnings “reflected very strong contributions from trade and optimization of oil and petroleum products, as well as lower operating expenses,” Shell said.
Profits from refining and trading operations increased to $ 1.5 billion, almost 30 times more than the previous year, even as the refinery’s crude oil processing rates fell a quarter.
Shell is also the world’s largest oil and gas trader. High volatility in oil prices during the quarter allowed agile traders to make big profits by betting on price movements and stocking up on fuel to sell at higher prices in the future.
Shell, the world’s largest retailer with more than 40,000 service stations, also experienced a 39% drop in fuel sales, he said.
WRITTEN
Shell’s oil and gas production division, or upstream, had a loss of $ 6.7 billion, as production decreased 7% from a year earlier to 2.415 million barrels of oil equivalent per day.
The upstream loss included a $ 4.7 billion after-tax impairment charge related primarily to unconventional oil shale assets in North America, offshore assets in Brazil and Europe, and the OPL 245 block in Nigeria, which is on the heart of a bribery court case in Italy.
Shell’s liquefied natural gas (LNG) sales decreased 7% in the quarter. The Integrated Gas division posted $ 8.2 billion, primarily related to Queensland Curtis LNG and Prelude’s floating LNG operations in Australia.
Shell’s net debt increased to $ 77.8 billion and its debt / equity ratio, or leverage, increased 2.8% to 32.7% after the deterioration.
Shell also plans to announce a major restructuring by year-end.
(Report by Ron Bousso and Shadia Nasralla; Jason Neely and Pravin Char Edition)
