Though oil prices are up, the companies can’t shake off the previous losses.
If in mid-June, BP announced that due to the pandemic, it has to write down the value of the assets, now another major Oil company will do the same. The Royal Dutch Shell said yesterday that it would slash the value of oil and gas assets by as much as $22 billion as the pandemic hit hard the oil demand and, therefore, its price. It made oil cost less than $20 compared to $66 at the beginning of the year.
But assets underwriting is not the first move made by Shell. In April, it cut its dividends by two thirds for the first time since World War II, and it announced that it would go emission-free by 2050.
Although Oil trades now at over $40/ barrel, Shell's expectation is not that bright. It expects the price to settle at $35 this year, while it sees it at $60 per barrel in the long term.
Both Shell, and its rival BP, are making steps into transitioning to clean energy. Still, according to specialists, the debt will be more significant than the assets underwriting in Shell's case. But, in the grand scheme of it all, the future of oil and fossil fuels depends on whether governments will take into consideration the generic fuels to rebuild the global economy or invest in green energy based on the Paris climate agreement.
More will be announced when the company will release the financial report for the second quarter of 2020. The stock price was lower by 2.4% in early trading yesterday.
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Sources: bbc.com, reuters.com
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