Shell Posts Loss but Eyes Recovery This Year

LONDON—

Royal Dutch Shell


RDS.A 1.99{ffaccff6b5e07cc1f8fb65d0cd045bc540f1c3f8348a05c16905532f0496f447}

PLC reported a fourth-quarter loss as it continued to grapple with the fallout of the pandemic but said it would raise its dividend, forecasting a recovery in demand later this year.

International oil companies are reporting one of their worst annual performances in decades after Covid-19 sapped demand for oil, hitting prices. In response, energy companies have slashed spending, cut jobs and written down the value of their assets.

Shell on Thursday reported a fourth-quarter loss on a net current-cost-of-supplies basis—a figure similar to the net income that U.S. oil companies report—of $4.5 billion, down from a profit of $871 million in the same period the previous year.

For the full year Shell reported a loss of $19.9 billion, from a profit of $15.3 billion in 2019. Shell’s peers including

Exxon Mobil Corp.

,

Chevron Corp.

and

BP

PLC also reported losses for 2020.

Shell said its profit was hit by a fall in oil and gas production and weak refining margins, as well as already flagged asset write-downs and charges related to onerous contracts.

Overall, Shell’s full-year posttax write-downs totaled $21.3 billion, partly reflecting lower energy prices. That is part of a broader revision of asset values across the industry, triggered by the pandemic, which has been the steepest in at least a decade.

Shell said that while it was still feeling the impact of the pandemic with weaker energy demand, it had seen some signs of recovery in the fourth quarter and was optimistic about a continued rebound.

“I am optimistic that in the second half of the year we see a much more fulsome recovery,” said Chief Executive

Ben van Beurden.

Oil demand is around 5{ffaccff6b5e07cc1f8fb65d0cd045bc540f1c3f8348a05c16905532f0496f447} to 7{ffaccff6b5e07cc1f8fb65d0cd045bc540f1c3f8348a05c16905532f0496f447} below the levels of 2019, but should return to those levels in 2022, as the aviation sector in particular recovers, he added.

Shell said it would raise its first-quarter dividend by 4{ffaccff6b5e07cc1f8fb65d0cd045bc540f1c3f8348a05c16905532f0496f447}, in line with the commitment made to shareholders last year of annual increases, after cutting it in April for the first time since World War II by two-thirds.

“We are coming out of 2020 with a stronger balance sheet, ready to accelerate our strategy and make the future of energy,” said Mr. van Beurden.

The company has said it would give an update next Thursday on its continuing restructuring and broader strategy to accelerate investments in low-carbon energy.

Rivals

Total SE

and BP have already laid out targets to increase renewable power generation, while reducing their dependence on fossil fuels.

The pivot to renewable energy comes as Shell and others in the industry are also seeking to reduce debt. Shell wants to cut its debt to $65 billion from $75.4 billion at the end of the fourth quarter. That is down from $79 billion a year ago after a number of asset sales.

An abundance of fossil fuels combined with advances in technology to harness wind and solar power has sent energy prices crashing around the world. WSJ explains how it all happened at once. Photo illustration: Carlos Waters/WSJ (Originally Published July 21, 2020)

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com

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