Shell Cuts 2,200 More Jobs to Withstand Lower-for-Longer Oilby
At least 5,000 positions to be lost around the world this year
Reductions are also consequence of BG Group acquisition
Royal Dutch Shell Plc will cut 2,200 more jobs, taking the tally of losses to 12,500 from 2015 to 2016 as Europe’s biggest oil producer continues to adjust to the slump in prices.
At least 5,000 jobs will be cut this year, the company said in an e-mailed statement. These reductions are in response to oil prices staying “lower for longer,” and a result of the acquisition of BG Group Plc earlier this year, said Paul Goodfellow, Shell’s vice president for the U.K. and Ireland. Shell and BG employed about 94,600 people at the end of 2015.
“These are tough times for our industry,” Goodfellow said in the statement. “We have to take further difficult decisions to ensure Shell remains competitive through the current prolonged downturn.”
The industry is cutting deeper despite oil’s 80 percent recovery since January. Prices remain about half the level of two years ago and producers’ earnings have been pummeled, credit ratings cut and borrowings increased to maintain dividend payouts. To help protect their balance sheets, companies have deferred or canceled billions of dollars of projects, renegotiated contracts with suppliers and eliminated thousands of jobs.
“Oil has recovered but is still below $50 and companies aren’t able to cover their dividends at that level,” said Jason Gammel, a London-based analyst at Jefferies International Ltd. “They are doing all they can and more cost-cutting measures are likely.”
Shell’s adjusted net income fell 58 percent to $1.6 billion in the first quarter following the collapse in prices. The company bought BG Group for $54 billion this year to get access to oil and natural-gas reserves from Australia to Brazil. The purchase has increased its debt to $70 billion and driven up its ratio of net debt to capital to more than 26 percent.