Shell recorded pre-tax losses of £19.8 billion during an “extraordinary” 2020 marked by the Covid-19 pandemic and lower commodities prices.
The British-Dutch major had chalked up pre-tax profits of £18.8bn in 2019, but was weighed down by huge impairments last year, related to the oil and gas price collapse in the second quarter.
Revenues fell sharply, by 48%, to £134bn, while losses attributable to shareholders, a preferred performance measure at Shell, totalled £15.9bn, against a surplus of £11.6bn in 2019.
Cash flow from operating activities for 2020 was £25.1bn, a decrease of 19% year-on-year.
Net debt was reduced by £2.9bn in 2020 to £55.5bn and cost savings ambitions were exceeded, with capex shrinking to £13.2bn, from a target of £14.7bn.
But gearing – net debt as a percentage of total capital – was 32.2% at year-end, compared with 31.4% at the end of Q3.
Shell said the pandemic continued to cause “significant uncertainty”, with an expected negative impact on demand for oil and gas.
The London-listed firm also warned that it may have to curtail production in response to demand, regulatory requirements and constraints in infrastructure.
Production from Shell’s upstream unit was 10% lower last year, at 2.42 million barrels of oil equivalent per day.
The company is “reshaping” in response to the latest downturn and in support of its push to become a net zero emitter by 2050, or sooner.
As part of those plans, Shell’s global headcount will be reduced by up to 9,000 roles.
Last month, Shell confirmed it was cutting 330 people from its UK oil and gas business, most of whom are in Aberdeen, over the next two years.
A significant number of the reductions are linked to North Sea projects Shell is looking to finish over the next few years.
This includes the Brent Charlie decommissioning project and a number of initiatives sanctioned by the company in recent years, such as the redevelopment of the Penguins field.
Shell achieved first gas from the Fram field, 137 miles east of Aberdeen, in June, but did not make an announcement to celebrate the milestone.
And at the start of April, Shell delayed several UK North Sea projects, including its Shearwater-Fulmar gas line re-plumb and the final investment decision for its Jackdaw development.
However, the UK North Sea has been named as one of Shell’s nine “core” upstream regions and is expected to keep receiving investment.
It is anticipated that Shell will drill exploration wells on the Jaws, Edinburgh and Pensacola fields, offshore UK, possibly this year.
Other steps taken to free up cash for the transition to net-zero included a first dividend cut since the 1940s, and by two-thirds, announced in April.
But in October CEO Ben van Beurden said a “new era of dividend growth” had arrived, and lifted payments 4% to 12.8p.
Mr van Beurden said today: “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.
“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 2021.”
Stuart Lamont, investment manager at Brewin Dolphin Aberdeen, said: “Shell’s results follow a similar pattern to BP’s earlier in the week, demonstrating the highly challenging environment for oil and gas companies over the past year.
“Adjusted earnings – the company’s preferred profit measure – have dropped sharply and the outlook for 2021 remains uncertain, with Shell suggesting it may need to curb production.
“Although there is some progress with its divestment programme and the dividend remains in place, of greater concern at a time when the company needs to invest is that gearing has increased.
“Much like BP, if Shell is to transition towards a net-zero business by its chosen date – or even sooner – it will need to find the flexibility and agility to invest in new energy propositions, while remaining an attractive prospect for shareholders.”