Royal Dutch Shell has reported a deep financial loss after a record write-down on the value of its oil and gas assets due to the collapse in global market prices triggered by coronavirus. The Anglo-Dutch oil giant revealed a net loss of $18.3bn (£14.1bn) for the second quarter of 2020, down sharply from a net profit of $3bn over the same period last year and $2.7bn in the first three months of 2020.
The company was rescued from what was expected to be its worst set of quarterly financial results on record by its oil trading business, which helped shore up the company’s income as prices plunged to 21-year lows. Shell reported an adjusted net income of $638m in the second quarter, down 82% from the same period a year earlier, after analysts predicted a $664m loss.
Ben van Beurden, Shell’s chief executive, said the company had delivered “resilient” cash flows in “a remarkably challenging environment”. The company was still forced to make a record downgrade to the value of its oil and gas assets through a post-tax impairment charge of $16.8bn, after revising down its forecasts for global oil prices in the wake of the COVID-19 pandemic. The write-down includes the group’s stake in an offshore oilfield in Nigeria, owned in partnership with Italian oil company Eni, which is at the center of an ongoing corruption court case in Italy.
Shell expects global oil prices to remain well below average 2019 levels for the next three years. It has forecast oil prices to average $35 a barrel in 2020, rising to $40 in 2021, $50 in 2022, and $60 in 2023. The average oil price last year was $64.36 a barrel. Falling oil price forecasts have also taken a toll on French oil company Total, which announced an $8bn write-down on the value of its assets, including $7bn from its Canadian oil sands.
Total reported a profit for the second quarter of $126m, down 96% from the same months last year, but has decided to keep its shareholder dividends intact.
Earlier this year, Shell slashed its shareholder dividend for the first time since the Second World War and warned it is facing a “crisis of uncertainty” following the collapse of global oil prices.