Shell confirms £16bn losses as pandemic decimates oil prices

Oil giant Shell has plummeted to a mammoth £16bn full-year loss after hefty writedowns as oil prices crashed amid the pandemic.

The plunge into the red compares with profits of £11.6bn in 2019 and comes after it was forced to slash the value of the oil in its fields last year as prices collapsed.

The cost of crude has since started to recover, but not enough to prevent Shell slumping to a £2.9bn loss in the final three months of the year.

Shell said that, on an adjusted basis, it made earnings of £289m in the fourth quarter, though this was worse than expected and 87% lower than a year earlier.

The group has been making swingeing cost cuts to weather the crisis, announcing in September plans to axe between 7000 and 9000 jobs worldwide.

Chief executive Ben van Beurden said the group had taken “tough but decisive actions”.

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

“We are committed to our progressive dividend policy and expect to grow our US dollar dividend per share by around 4% as of the first quarter 2021.”

The figures come after rival BP reported the biggest losses in its history on Tuesday, when plunging oil prices and demand sent it tumbling into the red by £13.2bn in 2020

BP’s figures showed the impact of £12.8bn in write-offs made in the summer after Brent crude oil prices plummeted during the crisis.

Despite the eye-watering losses, FTSE-100 listed Shell boosted its dividend in a more bullish sign for the year ahead, saying it expected to raise the payout by 4% in the first three months of 2021 from the previous quarter.

Last year, it cut its dividend for the first time since the Second World War in the face of the crisis.

Its figures showed current cost of supply (CCS) losses of £14.6bn for 2020 against earnings of £11.3bn in 2019.

Shell has been forced to write off more than £20bn since the start of the crisis.

It gave a cautious outlook for 2021, echoing comments by BP earlier this week, when it rattled investors with predictions that demand will remain under pressure.

“As a result of the Covid-19 pandemic, there continues to be significant uncertainty in the macroeconomic conditions, with an expected negative impact on demand for oil, gas and related products,” Shell said.

The investment manager at Brewin Dolphin Aberdeen says the figures demonstrate a “highly challenging environment” for oil and gas.

Stuart Lamont said: “Royal Dutch Shell’s results follow a similar pattern to BP’s earlier in the week, demonstrating the highly challenging environment for oil and gas companies over the past year.

“Adjusted earnings – the company’s preferred profit measure – have dropped sharply and the outlook for 2021 remains uncertain, with Shell suggesting it may need to curb production.”