Anglo-Dutch oil giant Royal Dutch Shell said that it slumped into a $24-million loss in the first quarter as the novel coronavirus crushed oil demand and crashed prices.
Earnings after taxation nosedived from $6.0 billion in the first quarter of 2019, the energy major said in a statement, warning that the COVID-19 pandemic would also spark a difficult second quarter as the oil market slumps.
“As a result of COVID-19, there is significant uncertainty in the expected macroeconomic conditions with an expected negative impact on demand for oil, gas and related products,” Shell said.
“Furthermore, recent global developments and uncertainty in oil supply have caused further volatility in commodity markets.”
The energy sector has been ravaged this year by collapsing oil prices, as COVID-19 has shut down swathes of the world economy.
Earlier this month, the market went into meltdown with New York light sweet crude briefly diving into negative territory as sellers had to pay to offload oil with storage capacity at breaking point.
Crude futures also plunged to record lows following a vicious price war between major oil producers Saudi Arabia and Russia.
Shell added that production fell one percent to 3.719 million barrels of oil equivalent per day in the first three months of the year. And it warned that the second quarter would see a sharper drop as a result of the market collapse.
“Due to demand or regulatory requirements and/or constraints in infrastructure, Shell may need to take measures to curtail or reduce oil and/or gas production,” it said in the statement, noting it could also reduce refining and chemical plant activity.
“These measures would likely have negative impacts on Shell's operational and financial metrics,” it added.
Chief Executive Ben van Beurden warned that the company was facing “extremely challenging conditions” as Shell also slashed its shareholder dividend for the first time since the 1940s, according to the Financial Times.
Shell had already announced last month that it would slash costs and capital expenditure by billions of dollars due to fallout from the coronavirus pandemic.
The group had revealed in March that it will axe operating costs by $3.0-4.0 billion over the next 12 months, and will reduce its annual spending to $20.0 billion from $25.0 billion.
