Shell Reports 71% Drop in 2020 Annual Profit as Energy Demand Dips

The coronavirus pandemic has pulled profits down despite revenue improvement in Q4 2020


Royal Dutch Shell reported a slump in annual profits as the coronavirus pandemic hammered its revenues due to a decline in oil and energy demand.

Shell, in its fourth-quarter report released on Thursday, reported adjusted earnings of $4.85 billion for 2020 or a steep drop of 71% from the $16.5 billion profit reported in 2019.

The British-Dutch oil and gas company disclosed full-year and fourth-quarter earnings results on Thursday depicting the devastating impact of the coronavirus pandemic on the world’s energy industry.

Fourth-quarter adjusted earnings also fell 87% year-on-year to $393 million compared to analysts’ estimates of $597 million

Income attributable to shareholders of Royal Dutch Shell Plc (RDS.A) amounted to a loss of $4 billion for the fourth quarter of 2020, which represents a 516% drop compared to the same period a year earlier.

Fourth-quarter Cash Flow from Operations also fell 39% year-on-year to $6.2 billion and 19% for the year to $34.1 billion.

Oil prices have recovered from last year’s lows — rising to a one-year high this week — but Covid-19 lockdowns in countries around the world are still affecting fuel sales and refining margins.

“2020 was an extraordinary year. We have taken tough but decisive actions and demonstrated highly resilient operational delivery while caring for our people, customers, and communities,”  Royal Dutch Shell Chief Executive Officer, Ben van Beurden said in a statement.

“We are coming out of 2020 with a stronger balance sheet, ready to accelerate our strategy and make the future of energy. We are committed to our progressive dividend policy and expect to grow our US dollar dividend per share by around 4% as of the first quarter of 2021,” van Beurden said.

Lower prices, lower demand and unfavorable deferred tax movements driving lower has affected the company’s adjusted earnings.

Oil production was also 14% lower compared with 2019 output due to OPEC+ curtailments, divestments, higher maintenance, lower gas demand, and hurricanes in the US Gulf of Mexico.

Despite reduced earnings, Shell stocks are up more than 3% year-to-date, after plunging to over 44% last year.

Shell’s results come as oil and gas giants seek to reassure investors about their future profitability, CNBC reports, pointing to an expected upswing in fuel demand in the second half of 2021 as a mass rollout of Covid vaccines are expected in many countries this year.

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JM Agreda is a freelance journalist for more than 12 years writing for numerous international publications, research journals, and news websites. He mainly covers business, tech, transportation, and political news for Businessner.