Accounting nightmare coming for Royal Dutch Shell. The Dutch oil giant has announced that in the second quarter of 2020 it will be forced to a heavy devaluation: we are talking about an inclusive figure between 15 and 22 billion euros post-tax. The reason is of course the impact of the coronavirus crisis and the trend of the energy market.
In particular, Royal Dutch Shell explains in a press release that it has revised the medium and long-term outlook for prices and refining margins "reflecting the effects of the coronavirus pandemic and its economic fallout - reads the note - as well as the supply and demand fundamentals of the energy market”.
The final forecast for the second quarter says that sales of petroleum products will be limited to a range between 3,5 and 4,5 million barrels per day, a sharp drop from 6,6 in the previous year precisely due to the "decrease significant” of demand following the pandemic.
This impact has made inevitable the revision of a "significant portion of the tangible and intangible assets of Upstram, Integrated Gas and refining", continues the note.
In detail, Royal Dutch Shell estimates that the write-downs will amount to 8-9 billion dollars in the gas sector, mainly in Australia, while another 4-6 billion will concern the upstream sector, mainly in Brazil and in shale in North America. Finally, write-downs of between 3 and 7 billion will be linked to the refining portfolio of petroleum products.
Due to the devaluations the debt ratio is expected to grow by up to 3%.
Shell's decision comes two weeks after the announcement by Bp of write-downs of between 13 and 17,5 billion dollars again due to the pandemic and the trend of the oil market.
Finally, regarding expectations on the oil market, Shell forecasts an average price per barrel of Brent (reference quality on the European market) at 35 dollars this year, which generally does not allow large groups to generate profits. Shell estimates that the price will recover to $40 in 2021 and $50 in 2022.
Read also: Oil, Shell cuts dividend but others will follow.
