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Shell expects $22B second-quarter hit due to depressed oil prices

Two weeks ago, competitor BP similarly estimated its asset values will be down for the period between April and July by as much as $17 billion. File Photo by Brian Kersey/UPI
Two weeks ago, competitor BP similarly estimated its asset values will be down for the period between April and July by as much as $17 billion. File Photo by Brian Kersey/UPI | License Photo

June 30 (UPI) -- The coronavirus crisis is the primary factor in a forecast by energy giant Royal Dutch Shell that the value of assets will take a $22 billion hit for the quarter, the company said Tuesday.

Shell said in an update it expects oil to trade at $60 per barrel in the long term, but see about half that for 2020 and $40 per barrel in 2021.

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Shell said it expects a post-tax impairment charge of between $15 billion and $22 billion for the second quarter, between April and the start of July. Pretax, that range is $20 billion to $27 billion.

"Given the impact of COVID-19 and the ongoing challenging commodity price environment, Shell continues to adapt to ensure the business remains resilient," Shell said in a statement. "In light of this, 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."

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Earlier this year, Shell downgraded estimates for oil sales volumes -- by millions of barrels per day -- due to a substantial global decline in demand.

"Updates related to receivables provisions are expected to have a negative earnings impact in the range of $200 to $300 million," the company added. "Inventory volumes are expected to be higher compared with the end of the first quarter of 2020, impacting working capital negatively."

Oil prices are off significantly from 2019 and 2018. According to the Energy Information Administration, the price for U.S. benchmark West Texas Intermediate crude this month was down more than $20 per barrel year-to-year and off about $30 per barrel from June 2018.

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International benchmark Brent crude is off nearly $30 per barrel compared to a year ago and almost $35 over the two-year span.

Two weeks ago, competitor BP similarly estimated asset values were down in Q2 by between $13 billion and $17 billion.

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Visitors wear face masks as they tour the Whitney Museum of American Art as it reopens on September 3. Photo by John Angelillo/UPI | License Photo

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