Shell has released a statement that it will overturn up to $4.5bn towards the value of its oil and gas assets after the rise in energy prices caused by Russia’s war on Ukraine.
Before the second-quarter results on 28 July, Shell announced that its refining margins have tripled over the period, amplified by recovery from the Covid-19 pandemic, low refining capacities, and decreased commodities exports from Russia.
Refining margins rose from $10.23 to $28.04 a barrel in the first three months of 2022. Shell mentioned that the increase in oil value would boost earnings to anywhere between $800m and $1.2bn.
The estimated price for 2023 for Brent crude was increased to $80 a barrel. Brent crude has averaged up to $114 a barrel in the quarter thus far.
Shell revised its mid and long-term commodities prices to reflect the current macroeconomic situations. The increment will result in a post-tax disablement reversal of $3.5bn to $4.5bn. In May, the company said that it expected enhanced returns to shareholders in the second quarter “in excess” of its present target of 30% of cash from operations through dividends and share buybacks.
Shell’s oil and gas production was expected to be up to 2.93 million barrels of oil per day in the quarter, the lowest in seven years.
Shell’s rival company, Exxon Mobil, signalled strong results by doubling its first-quarter earnings. Manav Gupta, an investment banking analyst at Credit Suisse, said that it could result in Exxon’s strongest quarters.
A report from Exxon indicates operating profits from the oil and gas sector of more than $10bn, which includes $4.5bn through gasoline and diesel production, and $2bn from chemicals and motor oils.
Exxon plans to use its increased profits to pay down debt and repurchase up to $30bn worth of its stocks, like most leading oil companies in the US.
Exxon spokesperson Casey Norton said that the company’s US shale output will rise by 25% this year, and oil processing at its biggest Texas refinery will grow 250,000 BPD in the first half of next year.
Norton also asserted: “High energy prices are largely a result of underinvestment by many in the energy industry over the last several years and especially during the pandemic.”