(Alliance News) - Royal Dutch Shell said Tuesday a more sombre view on oil and gas prices and refining margins means it will take impairments that will have a pretax impact of USD20 billion to USD27 billion.
Shell said it will take post-tax impairments of USD15 billion to USD22 billion in the second quarter of 2020. It said there will be no cash impact from these impairments.
They stem from Shell's revised view of mid- to long-term commodity prices and refining margins. Shell said it expects Brent oil to average USD35 a barrel in 2020, rising to USD40 in 2021, USD50 in 2022 and USD60 in 2023. It expects USD60 to be the long-term average.
Similarly, Shell revised down by 30% its expectation for long-term refining margins.
"Given the impact of COVID-19 and the ongoing challenging commodity price environment, Shell continues to adapt to ensure the business remains resilient," it said.
Shell 'A' shares were down 0.9% early Tuesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.3% at 6,207.06
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Hang Seng: up 0.4% at 24,388.93
Nikkei 225: closed up 1.3% at 22,288.14
DJIA: closed up 580.25 points, 2.3%, at 25,595.80
S&P 500: closed up 1.5% at 3,053.24
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GBP: flat at USD1.2279 (USD1.2271)
EUR: down at USD1.1214 (USD1.1243)
Gold: up at USD1,772.70 per ounce (USD1,770.31)
Oil (Brent): firm at USD41.44 a barrel (USD41.24)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
UK Brexit transition phase extension deadline
1100 BST Ireland unemployment
1100 CEST EU consumer price index preliminary estimate
1000 EDT US consumer confidence index
1230 EDT US Fed chair and Treasury secretary testify to House Financial Services Committee
1630 EDT US API weekly statistical bulletin
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The UK economy contracted by more than first estimated between January and March, dropping 2.2% in the joint largest fall since 1979, the Office for National said. On an annual basis, the UK economy contracted 1.7% in the first quarter of 2020 over the same quarter of the previous year. This was a downward revision of 0.1 percentage point from the previous estimate of a 1.6% decline. It was also the biggest fall since the third quarter of 2009, the ONS said. On a quarterly basis, UK gross domestic product shrank by 2.2% in the first three months of 2020, after showing no growth in the previous period and compared with a preliminary estimate of a 2.0% decline. The ONS said this was the joint largest fall in UK GDP since the third quarter of 1979, as the coronavirus lockdown from mid-March forced non-essential businesses to close and consumers to stay at home.
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Harsher restrictions are coming into force in Leicester following a surge in the number of coronavirus cases in the city. Non-essential shops will be closed from Tuesday, the day UK Prime Minister Boris Johnson looks to shift focus to the recovery from the pandemic with a multi-billion pound "new deal" for infrastructure projects, PA reports. Rising numbers of cases in the East Midlands city – 10% of all positive cases in the country over the past week – mean the planned easing of restrictions on Saturday will not take place, with people have been advised against all but essential travel. Health secretary Matt Hancock said Leicester's seven-day infection rate was 135 cases per 100,000 – three times that of the next highest city. While the exact area impacted is not expected to be made clear until later on Tuesday, Hancock said Leicester and the surrounding conurbation including Oadby, Birstall and Glenfield would be included.
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A streamlined application process will enable pubs and restaurants in the UK to get permission for on-street dining in around 10 days. Outlining reforms aimed at boosting the hospitality sector as it prepares to reopen on July 4, Business Secretary Alok Sharma stressed there were safeguards for local councils to refuse applications if they block the highway. The new measures, which have cross-party support, form part of the UK government's Covid recovery plan, which former Tory minister Caroline Nokes criticised as being "designed by men for men" as she questioned why barbers could open but not beauty bars.
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BROKER RATING CHANGES
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EXANE BNP CUTS RELX TO 'UNDERPERFORM' (OUTPERFORM) - PRICE TARGET 1650 (1900) PENCE
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COMPANIES - FTSE 100
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InterContinental Hotels Group said the pace of hotels reopening has continued to accelerate through the second quarter, with only 10% of the global estate currently still closed as a result of lockdown measures. IHG said good progress has been made across the Europe, Middle-East, Asia & Africa region, as government-mandated hotel closures have been lifted, with around 30% currently remaining closed. In Greater China, just 1% are closed. IHG said it expects to report a revenue per available room decline of 75% for the second quarter, which will result in a 52% decline for the half-year period. The company said there have been "small but steady" improvements in RevPAR through the second quarter, mostly attributable to the Americas franchised estate and the Greater China region. Occupancy levels in comparable open hotels have improved to over 40% in the US, it noted.
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Standard Life Aberdeen said Stephen Bird will join the board of directors and take up the role of chief executive-designate on Wednesday. Bird will succeed Keith Skeoch, who is stepping down as CEO after five years running the asset manager. Bird previously served as CEO of Global Consumer Banking at Citigroup.
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COMPANIES - FTSE 250
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Redrow said it has decided to scale-back operations in London to focus on the Colindale Gardens development and continue to target future growth in its higher-returning regional businesses and Heritage product line. The housebuilder said costs and related significant impairments associated with scaling-back the London business will be taken in its financial 2020 accounts. As a consequence of Covid-19 and making these provisions, Redrow warned profit for the financial year that ended on Sunday will be substantially below that of financial 2019. Turning to trading, Redrow said the timing of site closures due to Covid-19 towards the end of March had a significant effect on its results in a year which was budgeted to be weighted to the end of the second half. Redrow said it completed 4,032 homes in the year to the end of June compared to 6,443 in the previous year. Turnover is expected to be GBP1.34 billion, down from GBP2.11 billion last year. Redrow said its order book stands at GBP1.42 billion, up from GBP1.02 billion a year ago.
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Tuesday's Shareholder Meetings
Xtract Resources
LSL Property Services
Metal Tiger
Henry Boot
Oilex
Gunsynd
ASA International
Keystone Law
Maintel Holdings
Gulf Marine Services
Woodbois
W Resources
Ingenta
Good Energy
SIG
Prospex Oil & Gas
4d Pharma
Reach4entertainment
Fox Marble Group
GYG
Impellam Group
Petropavolsk
ATTRAQT Group
Mustang Energy
Safestay
i3 Energy
Universe Group
Trans-Siberian Gold
Robinson
Cobra Resources
Keller Group
Asiamet Resources
Centaur Media
RDL Realisation
Allied Minds
LXI REIT
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
