Shells increase oil and gas asset values ​​as refining soars


London-Shell said Thursday that it would cancel up to $ 4.5 billion in write-downs on oil and gas assets after raising its energy price outlook following Russia’s invasion of Ukraine.

Shell said in a pre-second quarter earnings statement on July 28 that a refining margin of nearly 3 during the period due to a recovery in global demand from the pandemic, a lack of refining capacity and a decline in fuel exports from Russia. Said it was doubled.

Revenues from trading oil and refined products were expected to be strong this quarter, but lower than in the first quarter of 2022, according to Shell.

Shell’s index refinement margin rose from $ 10.23 per barrel in the first quarter and $ 4.17 per barrel in the year-ago quarter to $ 28.04 per barrel in the second quarter.

Shell’s share rose 0.6% at 8:50 AM GMT, well below the 2.4% rise against the broader energy index.

Shell said it posted record quarterly profits of over $ 9 billion in the first quarter and cash flow in the second quarter was hit by an outflow of approximately $ 6 billion. He said that the “general volatility” of the market would hurt cash flow.

“Given the many offsetting implications for results, we see this statement as neutral. The main uncertainty is the size of the working capital outflow,” said Billage Volcataria, an analyst at RBC Capital Markets. Is in. “

Oil and gas prices continued to rise this quarter, with benchmark Brent crude averaging around $ 114 per barrel.

“In the second quarter of 2022, Shell revised its medium- to long-term oil and gas commodity prices to reflect the current macroeconomic environment and updated energy market supply and demand fundamentals,” he said. ..

Shell raised the estimated price of Brent to $ 80 a barrel in 2023, up from $ 60 in the 2021 annual report. In 2024 and 2025, the price of Brent was raised from $ 60 to $ 70 a barrel. The long-term price was $ 65, compared to $ 63.

The upgrade will cancel the $ 3.5 billion to $ 4.5 billion post-tax impairment. Shell wrote down more than $ 22 billion in 2020 after the pandemic plunge in oil prices.

Shell said it completed a $ 8.5 billion share buyback program in the second quarter.

Shell’s oil and gas production is expected to reach up to 2.93 million barrels of oil per day this quarter, the lowest in at least seven years, as a result of high field maintenance.

Shell, the world’s largest trader of liquefied natural gas (LNG), said quarterly LNG production is expected to range from 7.4 million tonnes to 8 million tonnes.

This figure reflects the removal of LNG from the Sakhalin 2 plant in eastern Russia, where Shell will withdraw.

Shell’s bigger rival, ExxonMobil, showed last week that a surge in profit margins from fuel and oil sales could generate record quarterly profits.

Ron Busso