Shell writes down $2.3bn on weaker economic outlook

Royal Dutch Shell said on Friday it expected to write down up to $2.3bn in the fourth quarter as it had been forced to shrink estimates for sector values, due to a weaker economic outlook.

In a trading update ahead of full year results, report showed that Shell also said it expected weaker margins in its refining, trading and marketing division while maintaining spending on the lower end of forecasts amid slowing demand for oil and gas.

The Anglo-Dutch company warned in October that trade tensions between the United States and China, the world’s two largest energy consumers, could hurt demand and take a toll on its performance.

Shell said it was expecting to take post-tax impairment charges in a range between $1.7bn and $2.3bn for the quarter “based on the macro outlook”. It did not say which assets the impairments relate to.

Since October, rivals Chevron, BP Equinor and Spain’s Repsol all wrote down a total of around $20bn, primarily in US shale gas assets due to lower long-term gas prices.

The impairment will likely increase Shell’s debt ratio, or gearing, which the company has struggled to reduce in recent years.

“This reduction in guidance and impairment appears to show that management underestimated how much weaker oil prices would be in the latter part of this year, as well as underestimating future demand for oil, along with its by-products,” said Michael Hewson, chief market Analyst at CMC Markets UK.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.