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Shell's revised 2Q20 outlook warns of impairments of up to US$22 billion

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Oilfield Technology,

Shell has updated its 2Q20 outlook, and has warned that aggregate post-tax impairment charges in the range of US$15 to US$22 billion are expected in the quarter.

The impairment charges anticipated are based upon the price of Brent being approximately US$35/bbl in 2020 and the Henry Hub gas spot price being US$1.75/MMBtu.

The company's integrated gas business is expected to take an impairment of US$8 – 9 billion, with the upstream segment taking an impairment of between US$4 – 6 billion, largely in Brazil and North America shales.

In the company's upstream operations, production is expected to be between 2300 and 2400 thousand barrels of oil equivalent per day. Although this production range is higher compared with the outlook previously provided, it has had a limited impact on earnings in the current macro environment.

Updates related to receivables and inventory provisions are expected to have a negative earnings impact in the range of US$200 to US$400 million compared with 2Q19. No cash impact is expected in 2Q20.

Cash flow from operations (CFFO) is expected to be negatively impacted by the Lula unitisation settlement in Brazil of around US$500 million, for which the earnings impact was recognised in 3Q18.

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