Shell avoids loss with strong trading but sees demand hit

Shell has responded to the pandemic by cutting its dividend for the first time since World War II and slashing planned spending by $5 billion this year. (Shutterstock)
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Updated 31 July 2020

Shell avoids loss with strong trading but sees demand hit

  • Anglo-Dutch company warns of further impact of pandemic on oil and gas prices

LONDON: Royal Dutch Shell avoided its first quarterly loss in recent history helped by its trading business — but announced nearly
$17 billion in impairment charges reflecting its lowered short-term oil and gas price outlook.

Shell had warned last month it was set to slash the value of its oil and gas assets by up to $22 billion after the coronavirus crisis hit energy demand and weakened the outlook. “Shell has delivered resilient cash flow in a remarkably challenging environment,” CEO Ben van Beurden said in a statement on Thursday.
The Anglo-Dutch company however warned of the continued impact of the pandemic on oil and natural gas prices and sales in the third quarter.
Shell has responded to the pandemic by cutting its dividend for the first time since World War II and slashing planned spending by $5 billion to a maximum of $20 billion this year.

FASTFACT

Shell is the world’s largest petrol station operator.

Movement restrictions to limit the spread of the virus have knocked energy demand with benchmark Brent oil prices falling below $30 a barrel in the second quarter, down by more than half from a year earlier.
Adjusted earnings in the second quarter, which exclude special items and are adjusted to the cost of supply, fell to $600 million from $3.5 billion a year ago, beating analysts forecasts of a $674 million loss.
The earnings “reflected very strong contributions from crude and oil products trading and optimization as well as lower operating expenses,” Shell said.
Refining and trading operations earnings jumped to $1.5 billion, nearly 30 times higher than a year earlier, even as refinery crude oil processing rates fell by a quarter.
Shell, the world’s largest retailer with more than 40,000 petrol stations, also saw a 39 percent drop in fuel sales, it said.


Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

Updated 09 August 2020

Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

  • Aramco see’s “partial recovery” from pandemic impact
  • Aramco president says company remains resilient

DUBAI: Saudi Aramco, the world’s biggest oil company, reported a net income of $6.57bn for the second quarter of 2020, the period which witnessed the most volatile oil market conditions for many decades.

The result, announced to the Tadawul stock exchange in Riyadh where the shares are listed, compared with income of $24.7 bn last year.

Amin Nasser, president and chief executive, said: “Despite COVID-19 bringing the world to a standstill, Aramco kept going. We have proven our financial resilience and operational reliability, setting a record in our business operations, while at the same time taking steps to ensure the health and safety of our people.”

Aramco’s dividend - a big attraction for the investors who bought into the world’s biggest initial public offering last year - will remain as pledged, Nasser added. Cash flow in the quarter amounted to $6.106 bn.

““Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results. Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivalled financial and operational strength. This helped us deliver on our plan to maintain a second quarter dividend of $18.75 billion to be paid in the third quarter,” he said.

Aramco said the loss was “mainly reflecting the impact of lower crude oil prices and declining refining and chemicals margins, partly offset by a decrease in production royalties resulting from lower crude oil prices and a decrease in the royalty rate from 20 per cent to 15 per cent, lower income taxes and zakat as a result of lower earnings, and higher other income related to sales for gas products.”

Sales and revenue in the period - which saw oil prices collapse on “Black Monday” in April - fell 57 per cent to $32.861 bn from the comparable period last year. 

Nasser said he was cautiously optimistic that the world economy was slowly recovering from the depths of the pandemic lockdowns.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies. Meanwhile, we continue to place people’s safety first and have adapted to the new normal, implementing wide-ranging precautions to limit the spread of COVID-19 wherever we operate.

“We are determined to emerge from the pandemic stronger and will continue making progress on our long-term strategic journey, through ongoing investments in our business – which has one of the lowest upstream carbon footprints in the world,” he added.

Aramco expects capital expenditure to be at the lower end of the $25bn to $30bn range it has already indicated for this year.