Oil giant Shell writes off up to $5 billion in assets after exiting Russia

Royal Dutch Shell Products in Torzhok, Russia.

Andrei Rudakov | Bloomberg | Getty Images

seashells It announced that it would cancel between 4 and 5 billion dollars in the value of its assets after withdrawing from Russia in the wake of the country’s unprecedented invasion of Ukraine.

Thursday’s announcement offers a first glimpse into the potential financial impact of the major Western oil companies’ exit from Russia.

“For first-quarter 2022 results, the after-tax impact from depreciation of non-current assets and surcharges (such as reductions in receivables, expected credit losses and burdensome contracts) related to Russia’s activities is expected to range from $4 to $5,” Shell said in a statement Thursday. .

“These fees are expected to be set and therefore will not affect adjusted earnings.”

Shell had previously estimated that Russian write-downs would amount to $3.4 billion.

The company said that more details about the impact of ongoing developments in Ukraine will be set out in Shell’s first-quarter earnings report on May 5.

Shell was forced to apologize on March 8 To buy a huge discount shipment of Russian oil two weeks after the Russian invasion. It later announced that it was withdrawing its involvement in all Russian hydrocarbons.

The company said it would no longer buy Russian crude oil and would close service stations and operations of jet fuel and lubricants in Russia. The company had already pledged to exit its joint ventures with the Russian gas giant Gazprom and related entities.

In an update Thursday, Shell also said that its cash flow is expected to be affected by “very large outflows of working capital as price increases affecting inventory have resulted in a cash outflow of approximately $7 billion.”

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Divestment ‘outweighs reputational damage’

Shell’s share price fell 1.8 percent in early trading, along with the share price of an oil giant BP.

“Despite the horrific costs, the stock price must remain reasonably resilient given that divestment far outweighs the reputational damage that would otherwise have occurred,” said Susanna Streeter, senior investment and markets analyst at Hargreaves Lansdowne.

Ross Mold, chief investment officer at British digital stockbroker AJ Bell, said Shell’s modest decline “reflects the fact that the company is also signaling a significant benefit from higher energy prices”.

He added that BP’s downfall was “likely the result of an in-depth reading as investors looked at what that might mean for its much larger Russian presence.”

Shortly after Russia invaded Ukraine, BP has announced that it will unload the cargo Its 19.75% stake in the state-controlled Russian oil company Rosneftafter 30 years of operations in the country.

Western oil companies have faced pressure from shareholders and governments to cut ties with Russia, but total energy CEO Patrick Pouyanne told CNBC in late March that the file A French company will not write off its assets in Russia Because that would actually mean giving it to Putin “for free”.

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