Shell said it will reverse between $3.5 billion and $4.5 billion of previously announced writedowns in response to the bullish outlook for oil and gas prices.
The global oil company said in an update ahead of its second-quarter results due on 28 July it is now assuming Brent crude prices of $80 per barrel in 2023 and $70 per barrel in 2024 and 2025, with a longer-term assumption of $65 per barrel.
“In the second quarter 2022, Shell has revised its mid and long-term oil and gas commodity prices reflecting the current macroeconomic environment as well as updated energy market demand and supply fundamentals,” the company said.
Shell has booked billions of dollars in impairments starting in 2020 as the pandemic choked global economic activity and demand for oil and gas, then Russia’s invasion of Ukraine prompted a retreat from assets such as Sakhalin 2 project in Russia’s far east.
However,commodity prices have moved much higher with the post-pandemic recovery and Russia’s invasion of Ukraine in February, which prompted Western sanctions.
The run on energy prices boosted Shell to its biggest ever profit for a single quarter in the first three months of the year with adjusted earnings of $9.1 billion, compared with $3.2 billion in the first quarter of 2021 and $6.4 billion in the fourth quarter of that year.
The company said second-quarter production is expected to increase to 2.93 million barrels of oil equivalent per day, as a result of field maintenance efforts.
It also said it completed an $8.5 billion share buyback programme in the three months to the end of June.
Shell has also responded to the shift in commodity prices by stepping up its upstream investments, most notably in the Americas.
The company recently swooped for a 51% operating stake in the North Platte deep-water oil project in the US Gulf of Mexico, leaving Equinor on 49%. The project will be renamed Sparta.
Key upstream acquisitions have also taken place in Brazil and Uruguay in recent months, and Shell is preparing to drill on exploration acreage in Suriname and Colombia.