Shell will write up to 5 billion dollars on the exit from Russia

Shell said its withdrawal from Russia would result in writedowns of $4 billion to $5 billion, while warning investors that extreme volatility in energy prices in the first quarter could affect cash flow.

The London-based giant’s statement shows that, despite a spike in oil and gas prices, Russia’s invasion of Ukraine has upended supermajors’ plans and forced them to adapt to historic changes in markets Energy.

The impairment exceeds Shell’s $3.4 billion in assets in downstream businesses and operations in Russia. But that pales in comparison to the $25 billion its counterpart BP could deduct from its much larger involvement in Russia.

While Western energy companies leaving Russia are likely to suffer massive financial losses, they are trying to minimize reputational damage from investing in Moscow-backed projects after the war on Ukraine. It also allows them to answer growing questions about how their Russian oil and gas operations fit into plans to go greener.

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For the first quarter, Shell also warned of around $7 billion in cash outflows from its operations due to “unprecedented volatility in commodity prices prevailing through the end of the quarter”, according to a report. press release released Thursday.

There could also be an additional “hard” impact on cash flow, as high energy prices lead to increased margin calls – additional funds that must be deposited with brokers and exchanges to cover a part of the value of commodity contracts. As prices rise, margin calls have become a major drain on traders’ cash reserves across the sector, with a lobby group in talks with the European Central Bank in a plea for help.

Shell said its oil and gas business results in the first quarter were likely to be better than in the prior period. It comes after an already strong set of earnings for gas in the last three months of last year, but a weak performance in the oil trading business.

Despite the depreciation and working capital movements, RBC analyst Biraj Borkhataria viewed Thursday’s statement as positive “given stronger LNG and petroleum trading, as well as a better result from chemicals than we hadn’t expected it.” Profits for the chemical unit are expected to be in line with the fourth quarter, with higher utilization offsetting higher raw material and utility costs, Shell said.

Beginning with the first quarter, which is expected to be announced on May 5, Shell will detail the profitability of its renewables and energy solutions business which was previously reported with its gas unit.

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