Shell to cut 10,000 jobs after record decline in profits

Shell confirms company will cut 10,000 jobs after recording 87 percent decline in annual profits in 2015 as oil slump continues

Photo by: Reuters
Photo by: Reuters

Shell's company logo is pictured at a gas station in Zurich on April 8, 2015.

Oil giant Royal Dutch Shell on Thursday announced an 87 percent plunge in annual net profits on slumping oil prices and confirmed it will cut 10,000 jobs after its sharpest decline in profits in more than a decade.

The Anglo-Dutch group reported profit after tax of $1.94 billion for 2015, compared with almost $15 billion the previous year, Shell said in a statement.

The slump had been expected after Shell announced two weeks ago that it foresaw annual profit of between $1.6 billion and $2.0 billion.

Thursday's update comes as Shell is slashing thousands of jobs, selling assets worth billions of dollars and exiting projects as oil prices tumble on world markets.

Oil companies have been downsizing staff and mothballing drilling rigs in response to a drop in oil prices from more than $100 a barrel in July 2014 to about $30 currently.

Another British energy giant BP on Tuesday posted the company's biggest loss in at least 20 years, ravaged by tumbling oil prices, and axed another 3,000 jobs.

Cars drive by a BP gas station in Brooklyn on February 2, 2016 in New York City. The oil industry giant reported on Tuesday a $3.3 billion fourth-quarter loss as oil prices continue to fall globally.

BP suffered a loss after taxation of $6.48 billion last year, compared with a net profit of $3.78 billion in 2014, it said in a results statement.

The energy major added it would slash 3,000 positions in its downstream business - including refining, marketing and distribution - by the end of 2017.

Shell is meanwhile close to completing a mega-takeover of British rival BG Group.

"We are making substantial changes in the company, reorganising... and reducing costs and capital investment, as we refocus Shell, and respond to lower oil prices," Royal Dutch Shell chief executive Ben van Beurden said in Thursday's earnings statement.

"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."

Ben Van Beurden, chief executive officer of Royal Dutch Shell, speaks during the 26th World Gas Conference in Paris, France on June 2, 2015. (Reuters)

Shell added that profit on a current cost-of-supplies (CCS) basis - which strips out changes to the value of its oil and gas inventories - slumped by 53 percent in 2015 to around $10.7 billion.

The company is very near to finalising a $68-billion takeover of smaller British rival BG Group after the pair won shareholder backing and cleared regulatory hurdles.

The deal is intended at strengthening Shell's position in the liquefied natural gas (LNG) market.

"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," van Beurden said Thursday, echoing recent comments.

World oil prices have shed about three-quarters of their value in around 18 months, mainly owing to a global supply glut but also because of weak demand growth and a strong dollar.

The crash in oil prices has been felt sector wide, with Norwegian oil giant Statoil on Thursday saying it was slashing investments and stepping up a cost-cutting programme after recording a huge annual loss of its own for 2015.

On Tuesday, US energy giant ExxonMobil announced plans to slash its capital budget and suspend a share repurchase programme.

TRTWorld and agencies