Andrei Rudakov Bloomberg | Getty Images Shell has announced that it will write off between $ 4 billion and $ 5 billion in assets after its withdrawal from Russia following the country’s unprecedented invasion of Ukraine. Thursday’s announcement offers a first look at the potential financial implications for major Western oil companies of leaving Russia. “For the results of the first quarter of 2022, the metaphorical impact of impairment of long-term assets and additional charges (eg write-offs, expected credit losses and burdensome contracts) related to operations in Russia is expected to be 4 to 5 “billions of dollars,” Shell said in a statement Thursday. “These charges are expected to be determined and therefore will not affect Customized Earnings.” Shell had previously estimated that the impairment in Russia would reach $ 3.4 billion. More details on the impact of ongoing developments in Ukraine will be presented in Shell’s first-quarter earnings report on May 5, the company said. Shell was forced to apologize on March 8 for buying a consignment of Russian oil at a big discount two weeks after the Russian invasion. It then announced that it was withdrawing from its stake in all Russian hydrocarbons. The company said it would no longer buy Russian crude oil and would close gas stations, aviation fuel and lubricants in Russia. The company had already pledged to leave its joint ventures with Russian gas giant Gazprom and its affiliates. In a statement on Thursday, Shell said its cash flow was expected to be hit by “significant outflows of working capital as price increases affecting inventories have led to cash outflows of about $ 7 billion.”
Disinvestment “compensates for the damage to reputation”
Shell shares fell 1.8% at the start of trading, along with that of fellow oil giant BP. “Despite the cost, the stock price should continue to be fairly resilient, as the divestment far outweighs the reputation damage it could have caused if it had not been withdrawn,” said Susannah Streeter, senior investment and market analyst. at Hargreaves Lansdown. Russ Mold, investment director at British digital stock company AJ Bell, said Shell’s modest decline “reflects the fact that the company is also showing a major benefit from rising energy prices”. He added that the drop in BP came “probably in a reading, as investors looked at what it could mean for its much larger Russian footprint”. Shortly after Russia’s invasion of Ukraine, BP announced it would land a 19.75% stake in Russian state-owned oil company Rosneft after 30 years in the country. Western oil companies have faced pressure from shareholders and governments to sever ties with Russia, but TotalEnergies CEO Patrick Pouyanne told CNBC in late March that the French company would not write off its assets in Russia, as in fact would mean giving it to Putin “for free.”
