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Oil giant Royal Dutch Shell on Thursday reported a sharp drop in net profit for the three months through to the end of June, following an unprecedented period of energy market turmoil and significantly weaker oil and gas prices.
The Anglo-Dutch company reported adjusted earnings of $638 million for the second quarter of 2020. That compared with net profit of $3.5 billion over the same period a year earlier and $2.9 billion in the first three months of 2020.
Analysts had warned that “Big Oil” companies, referring to the world’s largest energy majors, were likely to report “horrendous” second-quarter results as coronavirus lockdown measures coincided with an unparalleled demand shock.
The ongoing economic impact of the coronavirus pandemic had prompted Shell to announce that it expected to incur write-downs of up to $22 billion in the second quarter.
In a note to shareholders published June 30, which came shortly after a similar announcement by its peer BP, Shell said it now anticipated significantly lower oil and gas prices over the next 30 years.
The gloomy outlook for commodity prices through to 2050 followed Shell’s decision to cut its dividend to shareholders for the first time since World War II in the first quarter of the year.
The firm’s board explained at the time that maintaining the current level of shareholder distributions was “not prudent,” slashing the dividend by nearly two-thirds.
Shell now believes Brent crude futures will average $35 a barrel in 2020, down from a previous forecast of $60 for the international benchmark.
The company also lowered its Brent price forecast to $40 in 2021 and $50 in 2022, having previously said it expected prices to average $60 for each respective year.
Brent crude futures traded at $43.71a barrel on Thursday morning, around 0.1% lower, while U.S. West Texas Intermediate futures stood at $41.22, down 0.15%.
Exxon Mobil and Chevron are both expected to unveil their second-quarter earnings on Friday, with the U.K.’s BP poised to report on August 4.
Read More: Shell’s second-quarter profit slumps 82% on coronavirus hit to oil prices,
