Shell increases Russia’s write-down to $5 billion

Shell (SHEL.L) said on Thursday that it will write down up to $5 billion as a result of its decision to depart Russia, which is more than previously reported, but rising oil and gas prices boosted trade activity in the first quarter.

Shell stated in an update ahead of its earnings announcement on May 5 that post-tax impairments of between $4 billion and $5 billion in the first quarter will have no effect on the company’s profitability.

Shell, which has a market value of roughly $210 billion, has stated that the Russia writedowns would amount to around $3.4 billion. According to a Shell representative, the rise was due to extra possible repercussions related to contracts, receivables writedowns, and credit losses in Russia.

Shell shares were down 1.2 percent at the start of trade in London.

The beginning of 2022 witnessed one of the most volatile periods in the oil and gas industry’s history, with Western corporations like as Shell quickly withdrawing from Russia, suspending trading relations and winding down joint ventures in the aftermath of Moscow’s invasion of Ukraine.

Shell has announced the closure of all of its Russian activities, including a major liquefied natural gas project on the Sakhalin peninsula on Russia’s eastern border.

Shell provided no information about the future of its investments in Russian projects.

In the third quarter, benchmark oil prices rose to an average of more than $100 per barrel, the highest level since 2014, while European gas prices reached a new high.

The unusual volatility in commodity prices in recent months has driven numerous merchants to the verge, forcing them to increase downpayments on oil and LNG cargoes dramatically.

Shell, the world’s largest LNG trader, said earnings from LNG trading were likely to be higher in the third quarter compared to the previous three months. Oil trade earnings are expected to be ‘substantially higher’ in the third quarter.

Cashflow inflows of roughly $7 billion due to changes in the value of oil and gas stockpiles would have a negative impact on cashflow in the quarter.

Shell reported that its fuel sales averaged 4.3 million barrels per day in the third quarter, down from 4.45 million bpd the previous quarter. Volumes of LNG liquefaction were marginally higher in the third quarter, averaging 8 million tonnes.