Royal Dutch Shell on Tuesday said it had cut its long-term outlooks on oil and gas prices as a response to the coronavirus pandemic. Shell now expects average benchmark Brent crude price for 2020, 2021, and 2022 at $35, $40, and $50 a barrel respectively, from $60 a barrel. However, the Anglo-Dutch company maintains its long-term oil price outlook at $60 a barrel.
For natural gas, Shell expects Henry Hub pricing to average $1.75/MMBtu in 2020 and $2.5/MMBtu in the following two years. Its long-term Henry Hub price outlook is at $3.0/MMBtu. Shell also cuts its estimated average long-term refining margins by 30%.
As a result of the revision, Shell estimates aggregate post-tax impairment charges in the second quarter to be between $15 billion and $22 billion. These estimated impairments charges include $8 billion – $9 billion from the integrated gas segment, $4 billion – $6 billion from the upstream division, and $3 billion – $7 billion from its refining and marketing segments.
These charges will likely increase Shell's debt-to-equity ratio, or gearing, by three percentage points which stood at 28.9% by the end of March.
