* Adjusted earnings fall to $600 mln from $3.5 bln
* Trading profit soars, fuel sales down 39%
* Net debt and gearing rise sharply
(Adds detail, graphics, shares)
By Ron Bousso and Shadia Nasralla
LONDON, July 30 (Reuters) - Royal Dutch Shell
avoided its first quarterly loss in recent history, helped by a
booming trading business, but announced nearly $17 billion in
impairment charges reflecting a pessimistic outlook for oil and
gas prices.
Shell had warned last month it was set to slash the value of
its oil and gas assets by up to $22 billion as the coronavirus
crisis hollowed out energy demand.
"Shell has delivered resilient cash flow in a remarkably
challenging environment," CEO Ben van Beurden said in a
statement on Thursday.
The Anglo-Dutch company warned, however, of the continued
impact of the pandemic on oil and natural gas prices and sales
in the third quarter.
Shell and its peers have historically weathered downturns
thanks to their large refining operations, whose profit margins
are boosted by lower crude oil prices and stronger fuel demand.
But in this crisis, the drop in oil and gas prices was
coupled with an unprecedented drop in global demand.
Shell has responded by cutting its dividend for the first
time since World War Two and cutting planned spending by $5
billion to a maximum of $20 billion this year.
It booked an overall impairment charge of $16.8 billion in
the quarter after lowering its short-term oil and gas price
outlook in the wake of the epidemic. The charge is at the lower
end of its previous guidance.
Shell's shares were up 0.2% in early trading.
TRADING SURGES
Restrictions on movement globally to limit the spread of the
coronavirus have knocked energy demand, with benchmark Brent oil
prices falling below $30 a barrel in the second quarter, down by
more than half from a year earlier.
Shell's adjusted earnings in the second quarter, which
exclude special items and are adjusted to cost of supply, fell
to $600 million from $3.5 billion a year ago, beating analysts
forecasts of a $674 million loss.
The earnings "reflected very strong contributions from crude
and oil products trading and optimisation as well as lower
operating expenses", Shell said.
Refining and trading operations earnings jumped to $1.5
billion, nearly 30 times higher than a year earlier, even as
refinery crude oil processing rates fell by a quarter.
Shell is also the world's largest oil and gas trader. High
volatility in oil prices throughout the quarter allowed nimble
traders to make large profits by betting on price movements and
storing fuel to sell them at higher prices in the future.
Shell, the world's largest retailer with over 40,000 petrol
stations, also saw a 39% drop in fuel sales, it said.
WRITEDOWNS
Shell's oil and gas production division, or upstream, made a
loss of $6.7 billion as production declined by 7% from a year
earlier to 2.415 million barrels of oil equivalent per day.
The upstream loss included a post-tax impairment charge of
$4.7 billion mainly related to unconventional shale assets in
North America, assets offshore in Brazil and Europe, and the OPL
245 block in Nigeria which is at the heart of a bribery court
case in Italy.
Shell's liquefied natural gas (LNG) sales declined by 7% in
the quarter. The Integrated Gas division wrote down $8.2
billion, mainly related to the Queensland Curtis LNG and Prelude
floating LNG operations in Australia.
Shell's net debt rose to $77.8 billion and its
debt-to-equity ratio, or gearing, was up by 2.8% to 32.7%
following the impairments.
Shell also plans to announce a major restructuring by the
end of the year.
(Reporting by Ron Bousso and Shadia Nasralla; Editing by Jason
Neely and Pravin Char)