Shell raises value of oil and gas assets as refining soars

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General view of a Shell petrol station sign, in Milton Keynes, Britain, January 5, 2022. REUTERS/Andrew Boyers

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  • Shell raises the value of its assets to $4.5 billion
  • Refining margins nearly tripled quarter-over-quarter
  • Production drops due to maintenance

LONDON, July 7 (Reuters) – Shell (SHEL.L) said on Thursday it would reverse up to $4.5 billion in writedowns on oil and gas assets after it raised its outlook on energy prices following Russia’s invasion of Ukraine.

In an update ahead of second-quarter results on July 28, Shell said its refining margins nearly tripled in the period, boosted by the recovery in global demand from the pandemic, a lack of refining capacity and a drop in fuel exports from Russia.

Oil and refined products trading profits are expected to be strong in the quarter, but lower than in the first quarter of 2022, Shell said.

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Shell’s indicative refining margin increased in the second quarter to $28.04 a barrel, from $10.23 a barrel in the first quarter and $4.17 a year earlier.

Shares of Shell rose 0.6% at 0850 GMT, significantly below the 2.4% gains of the broader energy index (.SXEP).

Shell, which posted a record quarterly profit of more than $9 billion in the first quarter, said its second-quarter cash flow was hit by an outflow of about $6 billion. He said the “prevailing volatility” in the market would affect cash flow.

“We view the statement as neutral given a number of offsetting impacts on results, with the main uncertainty centering on the magnitude of working capital outflows,” RBC Capital Markets analyst Biraj Borkhataria said in a statement. a rating.

Oil and gas prices remained elevated during the quarter, with benchmark Brent crude averaging around $114 a barrel.

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

Shell raised its assumed price of Brent to $80 per barrel in 2023 from $60 in its 2021 annual report. For 2024 and 2025, the price of Brent has been raised to $70 per barrel from $60. The long-term price was $65, down from $63.

The upgrade will result in after-tax write-downs of $3.5 billion to $4.5 billion. Shell wrote off more than $22 billion in 2020 after oil prices collapsed due to the pandemic.

Shell said it completed its $8.5 billion share buyback program during the second quarter.

Shell’s oil and gas production is expected to reach 2.93 million barrels of oil equivalent per day in the quarter, its lowest level in at least seven years, due to intensive field maintenance.

Shell, the world’s largest liquefied natural gas (LNG) marketer, said its quarterly LNG production is expected to be between 7.4 and 8 million tonnes.

The figure reflects the withdrawal of LNG volumes from the Sakhalin-2 plant in eastern Russia, which Shell plans to exit.

Shell’s biggest rival, Exxon Mobil, signaled last week that soaring fuel and crude sales margins could generate record quarterly profit. Read more

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Reporting by Ron Bousso; Editing by Jason Neely and Edmund Blair

Our standards: The Thomson Reuters Trust Principles.

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