Shell second quarter 2020 update note
The Hague, June 30, 2020 - This is an update to the second quarter 2020 outlook provided in the first quarter results announcement on April 30, 2020. The impacts presented here may vary from
the actual results and are subject to finalisation of the second quarter 2020 results.
Unless otherwise indicated, presented post-tax earnings impacts relate to earnings on a current cost of supplies basis, attributable to shareholders, excluding identified items.
In addition, given the impact of COVID-19 and the ongoing challenging commodity price environment, Shell continues to adapt to ensure the business remains resilient. In light of this, Shell is announcing today a revised long-term commodity prices and margin outlook, which is expected to result in non-cash impairments in the second quarter results. Details of the outlook and impairments are provided in the later part of this document.
- Production is expected to be between 880 and 910 thousand barrels of oil equivalent per day
- LNG liquefaction volumes are expected to be between 8.1 and 8.5 million tonnes
- Additional well write-offs in the range of $250 to $350 million are expected compared with the second quarter 2019. No cash impact is expected in the second quarter
- Deferred tax charges are expected to have a negative impact on earnings in the range of $100 to $200 million. No cash impact is expected in the second quarter
- Trading and optimisation results are expected to be below average
- As previously communicated, more than 90% of our term contracts for LNG sales in 2019 were oil price linked with a price-lag of typically 3-6 months. Consequently, the impact of lower oil prices on LNG margins became more prominent from June onwards
- CFFO in Integrated Gas can be impacted by margining resulting from movements in the forward commodity curves. Margining inflows are not expected to be significantly different from those received in the first quarter 2020
- Production is expected to be between 2,300 and 2,400 thousand barrels of oil equivalent per day. Although this production range is higher compared with the outlook previously provided, it has had a limited impact on earnings in the current macro environment
- Updates related to receivables and inventory provisions are expected to have a negative earnings impact in the range of $200 to $400 million compared with the second quarter 2019. No cash impact is expected in the second quarter
- As previously communicated, CFFO is expected to be negatively impacted by the Lula unitisation settlement in Brazil of around $500 million, for which the earnings impact was recognised in the third quarter 2018
- While earnings are expected to show a loss, CFFO is not expected to reflect equivalent cash tax receipts due to the build-up of deferred tax positions in a number of countries. Additionally, due to phasing impacts, tax payments are expected in the second quarter