Shell cuts 6500 jobs & investment by 20% over weak oil

Royal Dutch Shell is cutting 6,500 jobs in Nigeria and at the rest of its global operations and will reduce capital spending by 20 per cent this year, as the oil company takes dramatic action in response to the plunge in oil prices.

Shell is also waiting on key regulatory approvals for its deal to buy BG, which 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 plans to reduce operating costs by $US4 billion this year, before making further cuts in 2016.

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.

Shell said it was “planning for a prolonged downturn” in oil prices.

Centrica was on the list of share losers, down 2% or 5.2p to 270.1p, as it announced plans to cut 6,000 jobs to save £ 750 million over five years. The current headcount of the company across the world is about 94,000, according to its website.

Like other oil majors, Shell’s performance has suffered from the past year’s steep drop in crude prices, which fell from $110 per barrel a year earlier to about $60 in the second quarter and are now near $53 per barrel.

BG shares rose as much as 1.1 percent in London trading and were up 0.7 percent at 1,087 pence as of 8:21 a.m. The stock has gained 19 percent since the Shell acquisition was announced, after falling 33 percent past year.

“These are challenging times for the industry, and we are responding with urgency and determination, but also with a great sense of excitement for the future”.

Shell disclosed the figures as it published second quarter results showing a 35% fall in earnings to 3.36 billion US dollars (£2.16 billion).

Just like the very famous companies such as Schlumberger Limited (NYSE:SBL) and Baker Hughes (NYSE:BH), shell too has laid off employees in order to cut costs. It also slashed its full-year capital investment outlook for the second time this year to $30 billion, down by 20% from a year earlier. We have to be an attractive and resilient company at today’s oil price, no matter how long this oil price will continue.

Looking into the future, Shell is betting on offshore oil fields in Alaska, which van Beurden described as having the potential to produce more energy than the biggest projects in the Gulf of Mexico.