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Shell (RDS.A) Renews Q4 View, Foresees $3.5-$4.5B Write-Offs

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Royal Dutch Shell (RDS.A - Free Report) recently provided an update on its fourth-quarter 2020 guidance and envisioned its post-tax impairment charges between $3.5 billion and $4.5 billion for the period. This write-down, which follows the company’s massive impairment charge of $16.8 billion during the second quarter, comes as a result of the coronavirus and its associated demand deceleration wiping billions off the oil and natural gas asset value.

What Does the Latest Write-Down Imply?

The energy industry, grappling with the twin demerits of oversupply and low pricing, expects the weak macro environment to persist. Companies like Shell, ExxonMobil (XOM - Free Report) , Chevron (CVX - Free Report) and BP plc (BP - Free Report) are carrying assets on their balance sheets that were purchased at a time when commodity prices were materially higher than the current figures. As the market deteriorates, the operators are ultimately forced to take write-offs.

Let’s now delve deep into some key segmental estimate revisions for the December quarter.


The upstream production is projected between 2,275 and 2,350 thousand barrels of oil equivalent per day (boe/d) after adjusting the impact of hurricanes on the Gulf of Mexico and the effect of mild weather in Northern Europe during the first half of the current quarter. The year-ago production was 2,813 thousand boe/d. However, Shell had earlier predicted its fourth-quarter 2020 upstream volumes to be 2,300-2,500 thousand boe/d. Taking into account the current realized liquid prices, Shell expects to incur an adjusted loss in this segment. 

Oil Products

Shell estimates fourth-quarter oil product sales in the band of 4,000-5,000 thousand barrels per day. Although this indicates a 22.3% decrease from the year-earlier reported number, the upper end of the estimate is assumed to be met. This Netherlands-based company anticipates its refinery availability between 72% and 76%.


The company’s chemical sales volumes are predicted between 3,600 and 3,900 thousand tons with the plant utilization of 77-81% of the producing volumes. Further, Shell expects chemicals base and intermediate margins to improve from the sequential quarter’s levels.

Integrated Gas

The company expects fourth-quarter LNG liquefaction volumes to contract to 8-8.6 million tonnes from its previous year’s quarterly output of 9.21 million tonnes. Moreover, its segmental production is forecast in the 900-940 thousand boe/d range. In the year-earlier period, Shell produced 950 thousand boe/d.

About Shell

This currently Zacks Rank #4 (Sell) energy player belongs to a global group of energy and petrochemical companies. It is involved in all phases of the petroleum industry from exploration to final processing and delivery. The company is scheduled to release fourth-quarter earnings results on Feb 4, 2021.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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