Shell PLC said July 7 that aggregate post-tax impairment reversals of $3.5-4.5 billion of previously impaired assets are expected in second-quarter 2022, primarily due to changes in commodity price outlook (OGJ Online, May 5, 2022).
Shell raised its mid- and long-term oil and gas commodity prices outlook in the second quarter to reflect the current macroeconomic environment as well as updated energy market demand and supply fundamentals. This resulted in a review of Shell’s upstream and integrated gas previously impaired assets.
The following Brent outlook has been assumed for impairment reversal testing: $80/bbl (2023), $70/bbl (2024), $70/bbl (2025), and long-term $65/bbl (real terms 2022). Impairment reversals are reported as identified items and have no cash impact.
In this outlook update, the company said it expects its natural gas production to be 930,000-980,000 boe/d in second-quarter 2022. LNG liquefaction volumes are expected to be 7.4-8 million tonnes, reflecting the derecognition of Sakhalin related volumes (OGJ Online, Mar. 7, 2022).
Trading and optimization results for integrated gas are expected to be lower compared to first-quarter 2022, which had exceptional trading optimization opportunities. Shell also expects one-off charges of about $200 million in the second quarter, including well write-offs, provisions, and commercial settlements.
Upstream production is expected to be 1.85-1.95 million boe/d, reflecting higher scheduled maintenance.
Meantime, the indicative refining margin is $28.04/bbl for second-quarter 2022, compared to $10.23/bbl in first-quarter 2022. The increased margin is expected to have a positive impact between $800 million and $1.2 billion on second-quarter results of products compared to first-quarter 2022, Shell said.
Marketing results are expected to be higher than first-quarter 2022 and in line with second-quarter 2021.