Topline
British energy giant Shell on Thursday said it expects to take a hit of up to $5 billion in the first quarter of 2022 following its decision to leave Russia, one of the first indications of the wider financial fallout of Vladimir Putin’s invasion of Ukraine for the sector as companies around the world cut ties with Moscow.
Shell said it could write down up to $5 billion after leaving Russia.
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Key Facts
Shell said it expects a post-tax impairment of between $4 billion and $5 billion of assets and charges related to credit losses and contracts in Russia in the first quarter of 2022,, higher than its previous estimate of $3.4 billion.
The write-down will not impact the company’s earnings, which are set to be announced in early May, Shell said.
Shell shares fell more than 2% in London on Thursday.
Shell is not the only energy company to be impacted: BP faces a hit of up to $25 billion for leaving Russia, the company said, stemming primarily from foreign exchange losses and abandoning its shares in Russian oil giant Rosneft, which accounts for around one third of its oil and gas production.
ExxonMobil is also preparing for losses in Russia, which could be as high as $4 billion for exiting a drilling project.
France’s TotalEnergies has been criticized for not fully exiting Russia and its refusal to write off its assets like some of its rivals, something CEO Patrick Pouyanne defended, arguing doing so effectively meant giving them to Putin for “free.”
Key Background
Just weeks into Russia’s invasion of Ukraine, Shell purchased a discounted consignment of oil from Russia, justifying the decision on the need to keep European fuel supplies stable. The company was heavily criticized for the decision and shortly after, it backtracked and apologized, pledging to stop buying Russian oil and gas and unwind its operations there. While energy companies are facing billions in write-downs over assets in Russia, the spike in oil and gas prices has many companies expecting significant profits. Shell said oil trading earnings are expected to be “significantly higher” in the quarter and earnings from liquid natural gas higher than the last quarter. U.S. lawmakers have criticized the industry for alleged profiteering as Americans grapple with high fuel prices, with prices at the pump remaining high despite slipping crude prices.
Tangent
The energy sector is not the only industry that is heavily exposed to Russia. Finance, for instance, stands to lose billions. JPMorgan CEO Jamie Dimon said the bank could lose around $1 billion over time due to the war and Citigroup warned it could lose nearly $5 billion.
Further Reading
Wall Street Banks Could Lose Billions In Russia—Here’s How Much Exposure They Have (Forbes)
Insurance industry braces for soaring payouts from war in Ukraine (FT)
