Shell PLC on Thursday said it expects to book an impairment reversal of up to $4.5 billion on an improving commodity price outlook.
The London-based oil major expects to book impairment reversals in a range of $3.5 billion to $4.5 billion, due to changes in its commodity price outlook.
It expects a Brent price of $80 per share in 2023, before $70 in 2024 and 2025. Since the start of 2022, Brent prices have risen 30% to stand around $101.27 on Thursday morning.
‘In the second quarter 2022, Shell has revised its mid and long-term oil and gas commodity prices reflecting the current macroeconomic environment as well as updated energy market demand and supply fundamentals. This resulted in a review of Shell’s Upstream and Integrated Gas previously impaired assets,’ the company explained.
The statement came in a pre-second quarter results update from the oil major.
For Upstream, it expects quarterly production between 1.9 million to 2.0 million barrels of oil equivalent per day, falling from the 2.3 million barrels produced a year before due to higher scheduled maintenance.
‘Trading and optimisation results for Integrated Gas are expected to be lower compared to the first quarter 2022, which had exceptional trading optimisation opportunities,’ Shell explained. It expects liquefied natural gas liquefaction volumes at between 7.4 million tonnes to 8.0 million tonnes.
This excludes volumes from Sakhalin, Russia. ‘Sakhalin results derecognition is expected to have a negative impact of $300 million to $350 million,’ Shell said.
Shell also said it expects its indicative refining margin to improve to $28.04 a barrel in the second quarter, from $10.23 in the first.
This will hand a boost between $800 million and $1.20 billion to its Products division, a provider of lubricants, in the second quarter.
Meanwhile, for its Renewables & Energy arm, Shell expects adjusted earnings of between $400 million and $900 million in its second quarter. The division has benefited from ‘higher trading and optimisation margins for gas and power due to continued exceptional market environment in various markets.’
Shell shares were 1.1% higher at 1,996.80 pence each in London on Thursday morning.
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