The impairment is the largest the oil giant is experiencing since it merged with Shell Transport & Trading Co Ltd in 2005. It also reflects how the pandemic had heavily affected Shell’s businesses. The company lost money in all its divisions from pumping to transport.
The company estimated its oil sales volumes in Q2 2020 to be between 3.5 million to 4.5 million barrels per day, compared to 6.6 million per day which was recorded during the same quarter a year ago. This dramatic downside was attributed to a major drop in demand.
Note that other major oil companies have also announced write-downs in 2020.
Specifically, British Petroleum announced as much as $17.5 billion in write-downs. Similarly, Chevron also announced a $10.4 billion write-down, even as Baker Hughes and Occidental both announced write-downs of $15 billion and $9 billion, respectively.
Meanwhile, Royal Dutch Shell had earlier this year, shocked investors by cutting dividend by 2 thirds for the first time since World War 2. This was shocking because the company is one of the biggest dividend payers for institutional investors in the FTSE 100.
Shell expects more discomfort from LNG Sales as crude oil influences on its price becomes a lot more prominent in June. However, Shell expects LNG sales to rebound to pre-COVID-19 levels in the long term.
In 2019, Shell announced it paid a total of $5.6 billion to Nigeria, which was the highest it paid to any country.