Shell makes $20bn loss as Covid crisis downgrades assets

Royal Dutch Shell plunged to a loss of almost $20bn last year after the impact of the Covid-19 pandemic on the global oil market stripped around $22bn from the value of its oil and gas assets.

The oil company was forced to write down its assets following a slump in oil and gas market prices, leading the company to a loss of $19.9bn compared with a profit of $15.3bn the year before.

The company’s adjusted financial result – which excludes the heavy hit to the value of its assets – fell by more than 80% to a profit of $4.8bn for the year, the company’s weakest full-year profits in at least two decades.

The historic financial toll caused by the coronavirus also hit BP which reported its first full-year financial loss since the Deepwater Horizon disaster earlier this week, and US oil company ExxonMobil reported its first annual loss ever.

Oil companies were hard hit by the sudden slump in oil prices last April as demand for transport fuels plummeted following sweeping travel restrictions to stem the spread of the virus. The global oil price fell to less than $20 a barrel, and has since recovered to $56 a barrel. The price remains well below the highs of $75 in 2019.

Ben van Beurden, Shell’s chief executive, said the company took “tough but decisive actions” to weather “an extraordinary year”. It cut up to 9,000 jobs last year, including more than 300 in the UK, and also slashed its dividend for the first time since 1945.

But Van Beurden said the company had emerged from 2020 “ready to accelerate our strategy and make the future of energy”, and begin growing its dividend again. Shell’s US dollar-denominated shareholder payouts will grow by 4% in the first quarter, he said.

The decision to increase Shell’s dividend for a second consecutive quarter is likely to be viewed by the market as a sign of confidence in the future of the oil industry as the rollout of vaccines potentially easestravel restrictions.

But Shell will face the challenge of a growing dividend against the backdrop of rising pressure to reduce its carbon emissions and cuts its net debt – which grew by $1.9bn to $75.4bn in the last quarter of 2020 – amid lower oil prices.

Shell said last year that it expects global oil prices to remain well below average 2019 levels for the next three years. It has forecast oil prices to average $35 a barrel in 2020, rising to $40 in 2021, $50 in 2022 and $60 in 2023. The average oil price last year was $64.36 a barrel.