Shell reduced the value of its oil and gas assets between $3.5 billion to $4.5 billion to adjust to a more vulnerable outlook in Q4 2020.
The US Gulf of Mexico hurricane as well as the mild weather in Northern Europe impacted upstream production and it is expected to reach between 2.275-2.350 million barrels of oil equivalent per day (mmbbloe/d). Reduction in the upstream business is expected to exceed Q3 2020 by $100 to $200 million. As for gas production, it is expected to range between 900,000- 940,000 barrels of oil equivalent per day (bbloe/d). Liquified Natural Gas (LNG) volumes are expected to be between 8-8.6 million tons (mmt).
When it comes to downstream business, Shell stated that its sales from oil products are expected to be between 4-5 mmbbl/d. Meanwhile, chemical sales are expected to be between 3.6-3.9 mmt as well as having a better base and intermediate margins compared to Q3 2020. The company also adjusted its earnings for Q4 2020 to a net expense of $900-$975 million as a result of unfavorable movements in deferred tax positions.
Shell remarked that its adjustment relies on the prevailing commodity prices and forward curves that are likely to affect earnings and Cash Flow From Operations (CFFO). The company will also provide a strategy update in February 2021.