Royal Dutch Shell (RDSB) has upped the ante in its response to Covid-19. The supermajor has taken out a new $12bn (£9.7bn) loan and announced impairments of up to $800m based on the new price forecasts for this year. Including another new loan of $10bn from the end of 2019, this has taken its liquidity to $40bn.
Shell has already cancelled its buyback scheme and will cut spending by around $5bn this year, and is aiming for a $3bn-$4bn drop in operating costs over the next 12 months in response to the Covid-19 crisis.
This heavy response comes in the context of oil at an 18-year low around $20 per barrel in places, and with negative pricing even floated as a possibility as storage space runs out. Consultancy Rystad Energy said the weak prices were not going away any time soon. “The ‘mother of all oil market surpluses’ continues to grow for April, with supply potentially outpacing demand by more than 20m barrels per day,” said Rystad head of oil markets Bjornar Tonhaugen.
Shell said it would lose $6bn in cash flow from operations (CFFO) for every $10 lost from the average oil price for the year, although the company said this model was more applicable to smaller changes than those seen recently.
