Oil Majors Mixed - Royal Dutch Sees Up to $22 Billion Charge

Global oil company Royal Dutch Shell expects a post-tax second-quarter charge of $15 billion to $22 billion due to lower oil prices.
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Global oil company Royal Dutch Shell  (RDS.A) - Get Report says that it expects to take a post-tax second quarter impairment charge of $15 billion to $22 billion due to lower oil prices. 

The company expects Brent crude price to average about $35 a barrel this year, leading to the impairment charges, and increase to $40 in 2021. 

"The refining asset valuation updates reflect Shell’s strategy to reshape and focus its refining portfolio to support the decarbonization of its energy product mix, leveraging assets and value chains in key markets," Royal Dutch Shell, based in The Hague, said in a statement. 

The oil major specified the charges in three categories: Integrated gas is expected to take $8 billion to $9 billion of charges, upstream operations $4 billion to $6 billion, and oil products $3 billion to $7 billion. 

“These impairments are expected to have a pretax impact in the range of $20 billion to $27 billion,” Royal Dutch said. “No impairment charge on goodwill is expected to be recorded in the second quarter.” 

Royal Dutch Shell expects to take the charges amid a plan it unveiled in April to reduce greenhouse-gas emissions to net zero by 2050. 

Earlier this month, U.K. rival BP also said that it would incur non-cash impairment charges and write-offs in the second quarter totaling $13 billion to $17.5 billion after tax. 

Global travel restrictions to prevent the spread of the coronavirus helped depress oil prices, which already were pressured by oversupply. 

West Texas futures contract crude prices, the U.S. benchmark for oil prices, recently fell 1.6% to $39.07 a barrel, while Brent crude prices fell 1.6% to $41.05. 

Royal Dutch Shell American depositary receipts at last check were off 3.5% at $32.28. Among other oil majors, Chevron  (CVX) - Get Report was off 0.7% at $87.10, ConocoPhillips  (COP) - Get Report was unchanged at $41.30, and BP ADRs  (BP) - Get Report were down 2.3% at $22.95.

Separately, The Wall Street Journal reported that Exxon Mobil  (XOM) - Get Report has so far declined to write down the value of its shale holdings, figuring that oil and gas values will rebound. 

Its peers, including BP, Hess  (HES) - Get Report and Occidental  (OXY) - Get Report, have taken multibillion-dollar shale-related impairments, the paper reported.

At last check ExxonMobil shares were off 1.1% at $43.82. Hess shares slipped 0.4% to $49.74 and Occidental shares gave up 1.1% to $17.67.