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Shell to take US$22bn profit hit after oil price reassessment

Between US$4bn-6bn will be written off its North American shale operation and in Brazil.

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Royal Dutch Shell PLC (LON:RDSB) said it is to take between a US$20bn-US$27bn hit to its profits this year after it lowered its assumptions of future oil and gas prices.

The move mirrors that of rival BP (LON:BP.) two weeks ago which said it would take an impairment charge of up to US$17.5bn after it also reduced its forecasts for future prices.

Shell, which will take the impairment charges in this quarter, said it now expects Brent crude prices only to recover to US$60 per barrel by 2023 and to stay at the level for the long- term.

Gas prices are also expected to make only a slow recovery to US$2.75 per therm over the same period.

After tax, the US$20bm-27bn pre-tax impairment will drop to a range of US$15bn-22bn, Shell said, with between US$4bn-6bn net written off its North American shale operation and in Brazil.

Shell also forecast an US$8bn-9bn net charge at its Australian gas assets and a further US$3bn-7bn across its portfolio of oil products.

As a result of the impairments, the oil group’s gearing or debt level rises by 3%.        

Shell released the impairment announcement alongside its second-quarter update that also detailed write-offs of US$250mln-300mln for the weak LNG price.

Oil production is estimated to be between 2.300-2,400 barrels per day, but inventory write-downs are predicted to cost between US$200mln-400mln.

Refining margins are expected to be significantly lower compared with the first quarter 2020 and are expected to be offset by higher trading and optimisation results, said the statement. 

Quick facts: Royal Dutch Shell PLC

Price: 1211.4 GBX

LSE:RDSB
Market: LSE
Market Cap: £94.59 billion
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