Shell to axe 6,500 jobs amid long oil slump

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 toa 37% drop in the oil and gas group’s second-quarter profits.

The Anglo-Dutch company is also increasing asset disposals to $50bn (€45.25bn) between 2014 and 2018 as it pushes ahead with its proposed $70bn acquisition of BG Group.

“We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery,” CEO 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 $3bn off its 2015 budget to bring it to $30bn. Shell said around 20% to 30% of asset sales worth $30bn between 2016 and 2018 will come from the downstream and midstream businesses, 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 cancelled, 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% stake in the Showa Shell refinery in Japan to Idemitsu for about $1.4bn.

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 $35bn, Shell said, lower than the $42 to$40bn that analysts had expected. “With progress on the deal on track this is a new emerging business which can pay dividends whatever the oilprice environment,” said analysts at Bernstein, who rate the stock as “outperform”.

Shell is still awaiting regulatory approvals for the deal from the EU, China and Australia, after Brazil, the US and South Korea cleared it.

The deal is expected to generate pre-tax benefits of around $2.5bn per year starting in 2018. The tie-up will turn Shell into the world’s leading liquefied natural gas company and one of the largest deep water oilproducers 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 $3.84bn, down from $6.13bn a year earlier and $3.25bn in the previous quarter.

The results beat expectations of $3.18bn, according to an analyst consensus provided by the company. A sharp decline of around 75% 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 47c per share. and committed to rewarding shareholders with at least the same payout in 2016.

Reuters