Royal Dutch Shell Plc Class B (LON:RDSB) have given shareholders and the market a modest update on Friday.
The firm said that it can expect impairment charges off around $2.3 billion, in the fourth quarter.
Additionally, the firm trimmed its forecast for quarterly oil production sales as the firm has seen itself in tricky waters over the last few weeks.
The firm alluded to the wider macroeconomic challenges that it faces, including the ongoing feud between the Untied States and China, two of the worlds largest energy consumers.
The firm also added that it expects oil production sales o6.5 million barrels of oil equivalent per day o 7 million boepd for the fourth quarter, compared with its earlier estimate of 6.65 million boepd to 7.05 million boepd.
The company had seen a slump in its third quarter trading, did report strong oil and gas trading however. Shell said that higher taxes would be bruising earnings by $500 million to $600 million in the fourth quarter.
Post-tax impairment charges are expected to range between$1.7 billion and $2.3 billion for the quarter, Shell noted.
The FTSE 100 listed giant said it expects additional well write-offs in the range of $100 million to $200 million in the period, while 2019 capital expenditure is expected to be at the lower end of its guidance range of $24 billion to $29 billion.
Shares of Shell dipped 0.92% on the announcement to 2,251p. 20/12/19 10:20BST.
Tough times for Shell
At the end of October, Shell saw their profits sink in their third quarter update.
As profits sunk, they did however beat market and analyst expectations posting earnings of $4.8 billion (£3.7 billion), well ahead of the $3.91 billion anticipated.
Oil and Gas production for Shell fell by 1% from the same period last year to 3.6m barrels of oil equivalent per day.
In a statement, chief executive Ben van Beurden said: “This quarter we continued to deliver strong cash flow and earnings, despite sustained lower oil and gas prices, and chemicals margins.”
The oil giant have a boost in oil and liquefied natural gas compensating for offset in oil prices, which have fallen 17% year on year.
It seems that these last two quarters have been disappointing for Shell, and an ensured effort will be needed to turn fortunes around in tough trading conditions.
Competitor SABIC also takes a hit
Shell joined titan rival SABIC (TADAWUL:2010) in the list of firms who had seen a slump in profits following volatile oil prices.
SABIC recorded an 86% drop in third quarter net profit after taking impairment charges off $400 million on its investment into Swiss chemicals firm Clariant.
The world’s fourth-biggest petrochemicals company posted a net profit of 830 million riyals for the quarter ended Sept. 30, down from 6.1 billion a year earlier.
“The decrease in net income is attributable to lower average selling prices in addition to recording the 1.5 billion (Saudi riyal) impairment provision,” it said.
Shells new Credit Facility – reason for optimism for shareholders
The firm also updated the market on a new credit facility, just a week ago.
The firm updated shareholders about a $10 billion new credit facility. The new facility has been agreed with a total of 25 banks and replaces the existing framework valued at $8.84 billion.
It will also, in a first, have interest and fees linked to Shell’s progress in reached its short-term net carbon footprint target. Shell has targeted reduce its footprint by 2% to 3% by 2021.
Shell has set an ambition to reduce the Net Carbon Footprint of the energy products by around 50% by 2050 and by 20% by 2035 in a time of high environmental awareness.
Bank of America and Barclays Bank acted as joint coordinators for the facility.
It seems that Shell are juggling a few issues currently as the year ends, however shareholders will have to remain optimistic.
2019 has been a year full of both political and economic tensions, with oil prices being volatile as ever.
2020 should bring some more stability for Shell, but the last two sets of quarterly results certainly will disappoint.