Shell Expects Impairments of Up to $3 Billion in Q2 2023

Shell, the energy major, announced on Friday that it anticipates after-tax impairments of up to $3 billion for the second quarter of 2023. This is mainly due to a 1% increase in the discount rate used for impairment testing. Additionally, Shell reported a decline in upstream production for the second quarter compared to the first three months of the year.

Impairment Costs and Production Decline

Shell revealed that it expects post-tax impairments of up to $3 billion, primarily driven by the higher discount rate for impairment testing purposes. The company estimates that its upstream production will fall to a range of 1.7 million-1.8 million barrels of oil equivalent per day in the second quarter. This is a decrease from the 1.9 million BOE per day recorded in the first quarter. The decline is attributed to scheduled maintenance activities involving assets located in the Gulf of Mexico, Norway, Malaysia, and Brazil.

Integrated Gas Division Performance

In its integrated gas division, Shell’s production during the second quarter is projected to be between 950,000 and 990,000 BOE per day. This represents a slight decline from the 970,000 BOE per day recorded in the first quarter. Regarding liquefied natural gas (LNG) volumes, the company expects the range to be 6.9 million-7.3 million metric tons, compared to 7.3 million tons in the previous quarter.

Outlook for Trading and Market Divisions

Shell anticipates significantly lower trading activity in its unit compared to the previous strong quarter. This is expected due to seasonality and fewer optimization opportunities. In the market division, the company projects sales volumes in the range of 2.4 million to 2.8 million barrels per day for the second quarter, slightly lower than the 2.45 million barrels per day reported in the first quarter.

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