Shell to cut 6,500 jobs

Lower oil prices continue to affect oil companies negatively, with Royal Dutch Shell announcing lower revenue and huge job cuts

Photo by: Reuters
Photo by: Reuters

Royal Dutch Shell on Thursday reported a 37 percent drop in second quarter profits and said it would cut 6,500 jobs this year and reduce spending further to deal with an extended period of lower oil prices.

The Anglo-Dutch oil and gas company also said it was planning more asset disposals alongside its proposed $70 billion acquisition of BG Group, bringing total asset sales between 2014 and 2018 to $50 billion.

"We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery," Chief Executive Officer Ben van Beurden is set to tell investors later in the day, according to the company.

Shell reported net income of $3.83 billion, down from $6.13 billion a year earlier and $3.25 billion in the previous quarter.

The result compared with expectations of $3.18 billion according to an analyst consensus provided by the company.

It said it anticipated 6,500 staff and direct contractor reductions in 2015 from a total of nearly 100,000 employees.

Shell said it would reduce 2015 capital investment to $30 billion, down by 20 percent from a year ago as it expects the downturn in oil prices to last for several years.

Shell cut spending earlier this year to $33 billion from around $35 billion in 2014.

Oil majors have cut 2015 spending by 10 to 15 percent from 2014. Costs, including rig rates, contractors and service providers have dropped by 20 to 30 percent.

Shell maintained its dividend at 47 cents per share.

The drop in earnings is against a backdrop of lower oil prices, which averaged $60 a barrel in the second quarter of 2015, up around $5 a barrel from the previous quarter but down from $110 a barrel a year earlier.

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 in the second quarter from a year earlier.

The company said its operating costs were expected to fall by $4 billion, or around 10 percent, in 2015 as part of a broad efficiency drive to boost its balance sheet.

Shell said it expects $30 billion of asset sales between 2016 and 2018, on top of a total of $20 billion in disposals for 2014 and 2015 combined.