Climate Denial Crock of the Week

Shell follows BP in massive write down of fossil fuel assets.
The Wall Street Journal’s assessment, below, is stunning.

“Large amounts of oil and gas are likely to be left in the ground.“

AP:

LONDON (AP) — Energy producer Royal Dutch Shell warned Tuesday it will slash the value of its assets by $22 billion to account for lower oil and gas prices amid the COVID-19 pandemic.

The company predicted the write-down for the quarter and said it continues “to adapt to ensure the business remains resilient” in challenging times. Earlier this month, its competitor BP, also cut the value of its own assets by up to $17.5 billion.

Shell predicted prices for Brent crude, the international oil benchmark, would be at $50 dollars a barrel in 2022. Earlier it had predicted a price of $60 a barrel. On Tuesday, it was trading near $41 a barrel.

Wall Street Journal:

The write-down follows one by BP PLC on a similar scale earlier this month. Lower oil and gas prices brought on by the pandemic and uncertainty over the pace of the transition to lower-carbon energy have caused major oil companies to question the value of their reserves. Exxon Mobil Corp. has resisted pressurefrom accountants to write down its assets. 

The reassessment of asset values by two of the energy sector’s biggest companies is about more than a response to the pandemic and its impact on oil and gas prices, said Luke Parker, vice president, corporate analysis at consulting firm Wood Mackenzie. The actions signal that large amounts of oil and gas are likely to be left in the ground.

“It’s about fundamental change hitting the entire oil and gas sector,” Mr. Parker said. “Within this write down, Shell is giving us a message about stranded assets, just like BP did a few weeks ago.”

Energy companies’ earnings are under pressure with oil prices having fallen by a third since the start of the year. Shell’s write-down comes as the industry cuts costs and reins in investments in the face of the health crisis, which has curbed global demand for crude oil by nearly a third in April, according to International Energy Agency estimates. 

In addition, companies including Shell, BP and Chevron Corp. are reducing their workforces. 

In April, Shell cut its dividend for the first time since World War II, upending investors’ expectations that major oil companies would provide reliable dividends.

On Tuesday, Shell’s shares traded down 3.2%. Shell’s largest write-downs come from its gas business, where it faces a charge of up to $9 billion, including reductions to the value of the Prelude and Queensland Curtis liquefied natural gas projects in Australia.

“With the low oil price and low LNG price I think Shell is choosing to take its time to get that project right,” said Mr. Toleman.

The write-down of the Prelude LNG project—the world’s largest floating LNG facility—is driven by factors including cost overruns and a slower startup than what was planned, said Daniel Toleman, analyst at consulting firm Wood Mackenzie. The project shipped its first LNG cargo a year ago following delays and Shell said production has been halted since February. 

Shell said Tuesday that its gearing level—net debt as a percentage of total capital—is expected to rise by up to 3% because of lower asset values. In April, Shell’s gearing was 29%, above the company’s target of 25%.

Fox Business:

Royal Dutch Shell PLC is writing down the value of its assets by up to $22 billion because of lower energy prices following the demand-sapping coronavirus pandemic.

The write-down follows that by BP PLC, which was on a similar scale earlier this month. Lower oil and gas prices brought on by the pandemic and uncertainty over the pace of the transition to lower carbon energy have caused major oil companies to question the value of their reserves.

Shell’s largest write-downs come from its gas business, where it faces a charge of up to $9 billion, including reductions to the value of the Prelude and Queensland Curtis liquefied natural gas projects in Australia.

The energy industry’s earnings are under pressure and some companies are having to borrow to pay dividends. In April, Shell cut its dividend for the first time since World War II, upending investors’ expectations that major oil companies would provide reliable dividends.

UPDATE: