Shell announces 10,000 job cuts and much-reduced profits for 2015
04 February 2016
Royal Dutch Shell said its full-year profits saw their steepest fall in 13 years from $19bn in 2014 to $3.8bn last year. Nevertheless, the group maintained its dividend payout to shareholders, a move that resulted in an overnight increase of 7% in its share price. Shell also said it would shed 10,000 jobs, around 11% of the total, to improve the group’s position in a market badly affected by the slump in oil prices.
Shell, which operates in more than 70 countries, employs around 94,000 people worldwide. The job losses will be complete by the end of 2016 and just under 3,000 will be as a result of the group’s takeover of the BG Group and a subsequent rationalisation of both groups’ activities.
Despite the fall in the price of oil, down 70% to $34 a barrel in less than two years, Shell said it would still push ahead with plans to acquire the BG Group for $52 billion.
Royal Dutch Shell's chief executive, Ben van Beurden, said the company was entering a new phase: "The completion of the BG transaction, which we are expecting in a matter of weeks, marks the start of a new chapter in Shell, rejuvenating the company and improving shareholder returns.
"We are making substantial changes in the company... as we refocus Shell, and respond to lower oil prices. As we have previously indicated, this will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies."
He added he would take further action could still be taken: "Shell will take further impactful decisions to manage through the oil price downturn, should conditions warrant that."
Shell said it had cut operating costs over the year by $4bn, or around 10%, and expected to cut costs by a further $3bn this year. The company also cut back hard on investment over the year, with capital spending slashed by $8.4bn from a year ago to $28.9bn.
Shell has scrapped multi-billion projects over the past year to weather the downturn, including its controversial exploration programme in the Alaskan Arctic Sea, the Bab sour gas field in Abu Dhabi and the Carmon Creek oil sands project in Canada.
Shell's 2015 capital expenditure came in at $28.9 billion in 2015, down $8.4 billion from a year earlier. For 2016, capex is expected to reach $33 billion for Shell-BG combined. Shell sold $5.5bn worth of assets in the course of 2015 and is planning to sell another $30bn.
The drop in the price of oil has been caused by oversupply driven by a glut of US shale oil, increased production from Russia and Opec responding by trying to put these rivals out of business by flooding the market. Iran will add to this oversupply as it ramps up exports following the removal of sanctions in January.
The International Energy Agency, which advises countries on energy policy, said it expected the global glut to last until at least late 2016.
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