Lagos — The Royal Dutch Shell, in an update note released on Monday, said it recorded $200 million depreciation in its upstream asset in the fourth quarter of this year.
It said the depreciation in the period is $100 to $200 million higher compared with the third quarter 2020.
The international oil major gave the update ahead of its fourth-quarter results release date on February 4.
Adjusted earnings are expected to show a loss in the current price environment, while production is expected to be between 2,275 and 2,350 thousand barrels of oil equivalent per day, reflecting hurricane impacts in the US Gulf of Mexico (between 60 and 70 thousand barrels of oil equivalent per day) and the effect of mild weather in Northern Europe in the first half of the fourth quarter.
According to the note, tax charge in the range of $600 million and $900 million is expected to negatively impact adjusted earnings in the fourth quarter. This includes unfavourable movements in deferred tax positions.
It expects refinery utilisation to be between 72% and 76%, while sales volumes are expected to be between 4,000 and 5,000 thousand barrels per day.
On integrated gas, production is expected to be between 900 and 940 thousand barrels of oil equivalent per day.
“Despite increased production compared with the third quarter 2020, earnings impact is limited due to PSC effects”.
Its LNG liquefaction volumes are expected to be between 8.0 and 8.6 million tonnes.
Approximately 80% of its term sales of LNG in 2020 has been oil price linked with a price-lag of up to 6 months.
The firm said its corporate segment adjusted earnings are expected to be a net expense of $900 to $975 million for the fourth quarter, impacted by unfavourable movements in deferred tax positions. This excludes the impact of currency exchange effects.
Post-tax charges, in aggregate, between $3.5 to $4.5 billion in relation to impairments, asset restructuring, and onerous contracts are expected in the fourth quarter. These expected charges reported as identified items relate to upstream (including partial impairment of Appomattox asset in the US Gulf of Mexico due to subsurface updates), Oil Products (including charges related to the announced transformation of the refinery portfolio), and Integrated Gas (onerous contracts).
“As per accounting standards, charges linked to Reshape organisational restructuring are expected to be recognised in 2021”.
Shell will provide a strategy update on 11 February 2021