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Shell to Slash 6,500 Jobs and Cut Spending to Cope With Lower Oil Prices

Thursday, 30 Jul 2015 07:28 AM

Royal Dutch Shell is to axe 6,500 jobs this year and step up spending cuts, responding to an extended period of lower oil prices which contributed to a 37 percent drop in the oil and gas group's second-quarter profits.

The Anglo-Dutch company is also increasing asset disposals to $50 billion between 2014 and 2018 as it pushes ahead with its proposed $70 billion acquisition of BG Group.

"We have to be resilient in a world where oil prices remain low for some time, while keeping an eye on recovery," Chief Executive Officer Ben van Beurden said.

Shell said it anticipated 6,500 staff and direct contractor reductions globally in 2015 from a total of nearly 100,000 employees, as it grapples with a halving in oil prices to around $55 per barrel in a year.

Like rivals BP, Statoil and Total it announced reductions in capital investments for a second time this year, shaving another $3 billion off its 2015 budget to bring it to $30 billion.

Around 20 to 30 percent of asset sales worth $30 billion between 2016 and 2018 will come from the downstream and midstream businesses, Shell said, leaving the expanded Shell group to focus on fewer but larger and more competitive assets.

Shell will only make two major investment decisions this year, with many projects scaled back, delayed or canceled, van Beurden said. He hinted at further spending cuts if economic conditions worsen, including a steeper drop in oil prices.

The company said it was selling a 33 percent stake in the Showa Shell refinery in Japan to Idemitsu for about $1.4 billion.

BG DEAL

Shell also reassured wary investors its bumper BG buy will not break the bank. If the deal goes through in early 2016 as planned, capital investments in 2016 will be $35 billion, Shell said, lower than the $42 to $40 billion analysts had expected.

"With progress on the deal on track this is a new emerging business which can pay dividends whatever the oil price environment," said analysts at Bernstein, who rate the stock as "outperform."

Shell is still awaiting regulatory approvals for the deal from the European Union, China and Australia, after Brazil, the United States and South Korea cleared it.

The deal is expected to generate pretax benefits of around $2.5 billion per year starting 2018. The tie-up will turn Shell into the world's leading liquefied natural gas company and one of the largest deepwater oil producers with a focus on Brazil.

Shell's second-quarter "cost of supplies" earnings, excluding identified items, the company's definition of net income, came in at $3.84 billion, down from $6.13 billion a year earlier and $3.25 billion in the previous quarter. The results beat expectations of $3.18 billion, according to an analyst consensus provided by the company.

Shell shares, which fell earlier this week to their lowest this year, were trading up 3.6 percent at 0920 GMT, while the European oil and gas sector was up 1.3 percent.

A sharp decline of around 75 percent in revenue from oil production was once again offset by refining and trading, where earnings more than doubled from a year earlier.

Shell maintained its quarterly dividend at 47 cents per share and committed to rewarding shareholders with at least the same payout in 2016.

© 2017 Thomson/Reuters. All rights reserved.

   
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Royal Dutch Shell is to axe 6,500 jobs this year and step up spending cuts, responding to an extended period of lower oil prices which contributed to a 37 percent drop in the oil and gas group's second-quarter profits.
shell, jobs, oil, crude
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2015-28-30
Thursday, 30 Jul 2015 07:28 AM
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