Fri. Jul 1st, 2022

Shell expects to take a hit of up to $ 5bn in the first quarter of 2022 following its decision to exit Russia.

The London-listed energy group made the announcement on Thursday after saying in February it would withdraw from all three of its joint ventures with Gazprom, the Kremlin-backed gas producer.

It later announced it would stop new purchases of Russian oil after the Financial Times revealed it had made $ 20mn buying a cargo of Russian crude.

Shell was one of many companies to withdraw from Russia following its full-scale invasion of neighboring Ukraine on February 24, as western groups reassessed their ties with Moscow and in some cases tore up business relationships that were decades in the making.

The oil major previously said the decision to quit the joint ventures in Russia would trigger impairment charges but had not provided a figure.

For the first quarter 2022 results, the post-tax impact from impairment of non-current assets and additional charges (writedowns of receivable, expected credit losses, and onerous contracts) relating to Russia activities [is] expected to be $ 4bn to $ 5bn, ”the company said in a trading update.

Shell also said its cash flow from operations would be “negatively impacted by very significant working capital outflows”.

“Reflecting the unprecedented volatility in commodity prices prevailing up to the end of the quarter, material additional movements could be seen in CFFO from margining effects on derivatives, changes in inventory volumes and in accounts payable and receivables,” it said.

In early March, Shell made a purchase of Russian oil when many traders were already avoiding new cargoes from the country.

Ben van Beurden, Shell’s chief executive, said at the time he was “acutely aware that our decision to purchase a cargo of Russian crude. . . was not the right one and we are sorry ”.

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