Royal Dutch Shell will slash billions of dollars from the value of its assets, underlining how the blow to oil demand from the pandemic and the shift towards renewable energy is forcing producers to rapidly adjust.
The Anglo-Dutch company said on Monday that the $4.5bn in charges relate to an oilfield in the Gulf of Mexico, the closure of a refinery and unprofitable liquefied natural gas contracts.
Shell has already disclosed about $18bn in writedowns so far this year, with the tally for 2020 potentially rising above the $22bn in impairments it flagged in June.
Already under pressure before the pandemic struck, Shell has since suspended share buybacks, lowered capital spending, slashed costs, issued bonds and secured new credit lines. It added to that wave of measures on Monday by separately announcing a deal to sell a minority stake in an Australian liquefied natural gas project for $2.5bn.
An April announcement that it would cut its dividend — the first since the second world war — helped send its stock price to a 25-year low. In an effort to woo back shareholders, Shell in October raised the payout and declared a new era of “dividend growth”.
Shell’s shares, which had already fallen more than 40 per cent this year, dropped 4 per cent in early afternoon trading in London.
The company is due to announce its fourth-quarter results in early February, just days before chief executive Ben van Beurden is due to update shareholders on its strategy for navigating the energy transition.
Shell has adopted a net-zero emissions goal as the pressure from both environmentalists as well as investors to tackle climate change grows, but it has been scrambling to come up with a corporate strategy that satisfies shareholders and staff.
The pandemic has complicated the picture by battering the finances of the energy sector. The company has already warned of a quarterly loss in its exploration and production division, as well as “significantly” weaker results from its oil trading business — a previous buffer for the group.
In the third quarter, the energy company’s net income adjusted for cost of supply — Shell’s preferred profit measure — dropped to $955m, down from $4.8bn in the same period a year ago. Shell is also expected to cut up to 9,000 job as part of an organisational restructuring to streamline the company.