Advertisement

Shell still working to navigate weak market

Dutch supermajor says capital spending in 2016 moving on a clear path downward.

By Daniel J. Graeber
Shell CEO Ben van Beurden said spending for the company expected to be more than 30 percent less than it was when Shell and BG Group were independent companies two years ago. Photo courtesy of Royal Dutch Shell
Shell CEO Ben van Beurden said spending for the company expected to be more than 30 percent less than it was when Shell and BG Group were independent companies two years ago. Photo courtesy of Royal Dutch Shell

THE HAGUE, Netherlands, May 4 (UPI) -- Spending plans for 2016 are less than the combined spending guidance between Shell and BG Group two years ago, the Dutch supermajor said Wednesday.

"We continue to reduce our spending levels, to capture cost opportunities and manage the financial framework in today's lower oil price environment," CEO Ben van Beurden said in a statement.

Advertisement

Shell published the first earnings report of the year since closing on its deal to acquire British energy company BG Group. The Dutch supermajor said the deal is paying off in terms of output, which is up roughly 15 percent compared with last year. Cash flow for the combined entity increased by $800 million.

In its report, Shell said the net income attributable to shareholders was nearly 90 percent lower than during the first quarter of 2015. Total divestments in the exploration and production sector totaled about $38 million and capital investments are on their way lower.

"Capital investment in 2016 is clearly trending toward $30 billion, compared to previous guidance of $33 billion, and some 36 percent lower than combined Shell and BG investment in 2014," van Beurden said.

Advertisement

Shell last month said it was closing some of the offices in the United Kingdom for BG Group as both companies move forward under a united structure. While voluntary layoffs are opened to BG Group staff, all internal vacancies at Shell are now available to them. Employees who do leave would be counted under Shell's previous target of eliminating about 10,300 from its payroll.

Shell said combining with BG Group would mark the start of a new chapter for the company, as the Dutch company grabs control of a sizeable portfolio of liquefied natural gas. Costs will move lower by about $4 billion for 2016, but also result in widespread redundancies. In a review of expectations for the second quarter, Shell said it expected to face "substantial" charges related to redundancies and restructuring changes.

"Given the significant decline in oil and gas prices in the first quarter 2016, second quarter earnings are expected to be negatively impacted by the price-lag effect in our LNG contracts," the company said in its financial statement.

Latest Headlines