Shell plans more cuts after BG deal

Hague-based energy giant Shell said Tuesday it reduced capital spending plan for next year as it prepares to finalize the combination with BG in a low oil price environment.

Shell and BG shareholder meetings to approve the proposed merger are expected to take place on January 27 and 28.

According to a statement by Shell, it is planning to cut US$7 billion of costs, and 10,300 jobs if shareholders approve the deal with BG.

The company’s operating costs are expected to fall by $4 billion in 2015, a reduction of around 10% from 2014. Shell’s costs could be reduced by a further $3 billion in 2016, marking a reduction of $7 billion in 2015 and 2016 combined, the statement said.

Next year’s capital investment for the combination is expected to be around $33 billion, $2 billion lower than previous guidance of $35 billion. This marks a reduction of around 30% from the combination of Shell and BG in 2014, which on a combined group basis was $47 billion.

“The combination with BG represents a tremendous opportunity to create value for both sets of shareholders, particularly in deep water and LNG. The combination with BG is a strong platform to refocus the company, to create a simpler and more competitive Shell,” Ben van Beurden, CEO of Shell, said in the statement.

At the same time, Shell is “pulling multiple levers” to manage through the current oil price downturn, according to van Burden.

“We aim to reduce costs and capital spending once again in 2016, as we combine Shell with BG, and continue to take impactful decisions on portfolio and options. This is to ensure that Shell can continue to finance the investment programme and the dividend, despite the downturn,” the CEO said.

“We have moved decisively in 2015 on spending and portfolio, and I am determined we will act decisively again in the coming years, ” van Beurden concluded.

LNG World News Staff