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Shell could cash in on $5 billion from Russia’s exit

After-tax writedowns of between $4 billion and $5 billion in the first quarter will not impact the company’s earnings, Shell said in an update ahead of its May 5 earnings announcement.

Shell, which has a market capitalization of around $210 billion, had previously said Russia writedowns would reach around $3.4 billion. The increase is due to additional potential impacts on contracts, write-downs and credit losses in Russia, a Shell spokesman said.

Shell (RDSA) the shares were down 1.2% at the start of trading in London.

The start of 2022 marked one of the most turbulent times in decades for the oil and gas industry, with Western companies including Shell rapidly pulling out of Russia, severing trade ties and ending joint ventures after the invasion of Ukraine by Moscow.

Shell said it would exit all of its Russian operations, including a major liquefied natural gas plant on the Sakhalin Peninsula on the country’s eastern flank.

Shell has provided no indication of the future of its stakes in Russian projects.

Benchmark oil prices climbed to an average of more than $100 a barrel in the quarter, their highest level since 2014, while gas prices in Europe hit a record high.

The unprecedented volatility in commodity prices over the past few months has pushed several traders to the brink as they rush to sharply increase deposits for oil and LNG cargoes.

Shell, the world’s largest liquefied natural gas trader, said LNG trading profits are expected to be higher in the quarter compared to the previous three months. Profits from oil trading are expected to be “significantly higher” in the quarter.

Cash flow for the quarter would be negatively impacted by “very large” outflows of around $7 billion due to changes in the value of oil and gas inventories.

Shell fuel sales averaged 4.3 million bpd in the quarter, compared with 4.45 million bpd in the prior quarter, Shell said. LNG liquefaction volumes increased slightly over the quarter, averaging 8 million tonnes.

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