Why Shell Sacked 12,500 Workers Worldwide, to Left 10 Countries
Shell – Following oil price regime that has characterized the global crude market for about two years, Royal Dutch Shell has announced it will exit oil and gas operations in up to 10 countries in a drive to deepen cost cuts and pay down debt . following its $54billion acquisition of BG Group. The main source for cost savings, including 12,500 job cuts this year, will come from overlaps in operations in areas including Australia, Brazil and the North Sea.
The company is active in more than 70 countries and said it would like to focus on 13 important nations where it is making good returns, including Brazil, Australia and the United States.
“Our portfolio is probably more diverse and spread around the world, and in some parts more mature, than we would like it to be,” Shell’s Chief Financial Officer, Simon Henry, told reporters on Tuesday.
The move, which includes the sale of 10 percent of its oil and gas production assets, will make Shell a smaller company that offers investors access to a more gas-heavy portfolio than some of its rivals such as ExxonMobil.
Presenting its strategy following the close of the BG deal in February, the Anglo-Dutch company outlined plans to target annual spending of $25 billion to $30 billion until the end of the decade, or less if oil prices remain below $50 a barrel.
It lowered its planned 2016 Capital Expenditure (Capex) to $29 billion, with exploration set at $2.5 billion, in a third cut from an initial $35 billion and raised its target for savings from the integration of BG to $4.5 billion, up $1 billion from previous guidance.
Chief Executive Officer Ben van Beurden hopes the new cuts will help boost Shell’s share price, which has underperformed rivals since oil prices started to collapse in mid-2014.
He promised shareholders Shell would generate double-digit returns for investors by the end of the decade.
“We need to be number one when it comes to total shareholder return,” van Beurden told journalists after the company announced a 10 per cent return in capital employed by the end of the decade, up from around 8 percent between 2013 and 2015.
Under this scenario, Shell assumes oil prices will average: in the mid-$60s in 2018.
“With all promises to shareholders maintained and lower forward capex than many thought possible, Shell in their own words is ‘creating a world class investment case’ which we agree with,” said analysts at Bernstein, who rate Shells stock as out-perform.