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Royal Dutch Shell has warned it expects to take a hit of up to $800m (\u20ac730m) in the first quarter as the coronavirus crisis and an oil price war have sent the cost of crude plummeting.<\/p>\nRoyal Dutch Shell has warned it expects to take a hit of up to $800m (\u20ac730m) in the first quarter as the coronavirus crisis and an oil price war have sent the cost of crude plummeting.<\/p>\n
The oil giant said it expects \u201csignificant uncertainty\u201d around oil prices and demand as the Covid-19 pandemic wreaks havoc on the world economy.<\/p>\n
Shell said it is bracing for an impairment charge of between $400m (\u20ac364m) and $800m (\u20ac730m) in the first three months of 2020 as it lowered its oil price outlook.<\/p>\n
The price of oil has crashed due to the pandemic and a price war between Russia and Saudi Arabia, with Brent crude falling to an 18-year low on Monday \u2013 closing at $22.76 (\u20ac20.74) a barrel.<\/p>\n
Shell said: \u201cAs a result of Covid-19, we have seen and expect significant uncertainty with macroeconomic conditions with regards to prices and demand for oil, gas and related products.<\/p>\n
\u201cFurthermore, recent global developments and uncertainty in oil supply have caused further volatility in commodity markets.<\/p>\n
\u201cThe impact of the dynamically evolving business environment on first-quarter results is being primarily reflected in March, with a relatively minor impact in the first two months.\u201d<\/p>\n
But shares in Shell rose 7% amid a wider bounce-back on the FTSE 100 Index amid hopes for a Covid-19 vaccine and after early signs the outbreak may be slowing in Britain.<\/p>\n
Shell also gave assurances that its financial liquidity was \u201cstrong\u201d and that is has secured another $12bn (\u20ac10.9bn) credit facility, on top of the $10bn (\u20ac9.1bn) at the end of last year.<\/p>\n
Details of its first-quarter charge come a week after Shell announced plans to heavily cut operating costs and spending proposals to help mitigate the impact of the coronavirus outbreak and tumbling oil prices.<\/p>\n
The company said it will reduce its operating costs by $3bn to $4bn (\u20ac2.73bn to \u20ac3.6bn) for the next 12 months.<\/p>\n
It said it will also reduce its annual spending to a maximum of $20bn (\u20ac18.2bn) for 2020 from its previous expectations of $25bn (\u20ac22.7bn).<\/p>\n
Shell said there will also be a material reduction in working capital as it said the actions are intended to \u201creinforce the financial strength and resilience\u201d of the business.<\/p>\n
Shares in the company have more than halved in the past two months as oil prices have continued to dive.<\/p>\n
Full-year figures in January revealed a 36% drop in profits to $15.3bn (\u20ac13.9bn) for 2019 after a dismal performance in the final three months of the year.<\/p>\n