Shell sees sharp second quarter oil, gas production fall over COVID-19 shut-ins

London — Shell said Thursday that it expects its oil and gas output to fall sharply in the second quarter as some producing assets are constrained or shut-in due to the global demand collapse from COVID-19 lockdowns.

Reporting its first quarter earnings, Shell said upstream production is expected to be approximately 1.75 million-2.25 million boe/d in the second quarter of 2020, down from 2.71 million barrels of oil equivalent/d in the first quarter of the year.

LNG-focused gas production is also expected to be approximately 840,000-890,000 boe/d, down from 955,000 boe/d in Q1, Shell said. LNG liquefaction volumes are expected to be approximately 7.4 million-8.2 million mt, down from 8.88 million mt in Q1.

"Due to demand or regulatory requirements and/or constraints in infrastructure, Shell may need to take measures to curtail or reduce oil and/or gas production, LNG liquefaction as well as utilization of refining and chemicals plants and similarly sales volumes could be impacted," the company said in a statement.

Reporting a 48% slump in adjustment earnings for the first quarter at $2.76 billion due to the oil price collapse, Shell said it has decided to cut its Q1 dividend and not to continue with the next tranche of the share buyback program.

During the quarter, Shell said the impact from COVID-19 saw a decrease of some 15% in its marketing volumes in March.

Oil product sales volumes are expected to be 3 million-4 million b/d in the second quarter, down from 5.28 million b/d in Q1. It said its refinery utilization rates are expected to be approximately 60%-70%.