Jun 30, 2020 - Energy & Environment

The meaning of Shell's $22 billion write-down

Shell gas station price sign

Photo: Jonathan Raa/NurPhoto via Getty Images

Royal Dutch Shell said this morning that it plans to write down the value of its assets by up to $22 billion as the pandemic lowers its oil and natural gas price forecasts.

The big picture: The warning about its upcoming second-quarter financial report follows BP's mid-June announcement that it would write down as much as $17.5 billion on its assets, and signaled that some of its oil discoveries will never be developed.

Why it matters: Wood Mackenzie analyst Luke Parker, in a note, says Shell's move signifies far more than just accounting technicalities or changes to near-term price assumptions.

  • “Within this write down, Shell is giving us a message about stranded assets, just like BP did a few weeks ago," he writes.
  • “Just a few years ago, few within the oil and gas industry would even countenance ideas of climate risk, peak demand, stranded assets, liquidation business models and so on. Today, companies are building strategies around these ideas,” Parker adds.

Go deeper: Why BP's revealing accounting move could be a signal for oil's future

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