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Shell Signals Another Poor Quarter for Oil Majors

The hits keep on coming for Big Oil.
(Siam Pukkato)
(Siam Pukkato)
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Royal Dutch Shell announced it would write down its asset value by up to $4.5 billion and warned of dismal fourth-quarter earnings, WSJ reports.

Why It Matters: “Shell’s update is the first indication of another tough quarter for the oil-and-gas sector, which continues to grapple with lower demand as Covid-19 lockdowns hit economies hard and halt travel around the world.”

What You Need To Know:

  1. Oil has stabilized a bit in the last few months, trading around $50 a barrel after dipping below $20 a barrel in April.
  2. Even with improved refining and chemical margins, and a boost to oil prices, the company has yet to steer upward from its pandemic-driven downturn.
  3. Shell’s $3.5 billion to $4.5 billion estimated write-down includes “an impairment of its deepwater oil-and-gas project Appomattox, in the Gulf of Mexico, as well as charges related to its refining operations and onerous gas contracts.”
  4. It also follows a $16.8 billion post-tax write-down Shell took earlier this year due to pandemic-driven lower energy prices.

That’s All Folks: Shell is trying to “sell assets to shore up its finances and reduce its debt, which stood at around $73.5 billion at Sept. 30.” The company also announced up to 9,000 job cuts in September as part of a restructuring plan.

  • If there’s anything to glean from Shell’s moves, and BP doing things like cutting 10,000 jobs as well, it’s that the pandemic could shift major oil companies to cleaner energy quicker.

Justin Oh:

It’s been a rough pandemic for oil companies and I don’t expect a real recovery in oil prices until mobility comes back thoroughly and lockdowns finally abate going forward.

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