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Royal Dutch Shell to slash 10,000 jobs to trim costs

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January 24
7:51 PM 2016

As part of the cost cutting exercise, Royal Dutch Shell has decided to cut down 10,000 jobs amid continuous drop in oil prices. The Anglo-Dutch energy major is aiming to reduce costs by $3 billion in 2016. Shell is also hoping on synergy advantages from the BG Group Plc merger. The merger process is expected to be completed in few weeks.

Shell agreed to take over BG in April on assumption that toil price would recover to $90 a barrel by 2020. However, the oil price fell from $115 barrel in mid-2014 to below $30 now. Analysts feel that it doesn't make a sense going ahead with the deal in the wake of such a low oil price.  

Shell reduced operating costs by $4 billion in 2015. A representative from Shell clarified that "10,000 jobs are in aggregate of 7,500 job cuts in third quarter of 2015 and 2,800 announced in early December." Shell suffered profit loss of 50 percent in fourth quarter, as reported by Market Watch.

"Together, these actions will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies, as streamlining and integration of the two companies continue," the company said in a statement.

The Royal Dutch Shell is going ahead with $60-billion (£40billion) takeover of BG Group. The Anglo-Dutch company is shrugging off doubts among shareholders about the viability of the takeover deal amid falling oil price. Shareholders are of view that Shell is paying over the odds to BG, according to a report published by MISH'S Global Economic Trend Analysis.

Ben van Beurden, chief executive of the Royal Dutch Shell, told shareholders that "he is pleased with Shell's operating performance in 2015 and the momentum in the company to reduce costs and to improve competitiveness."

Shell is anticipating 40 percent drop year-on-year in profits for fourth quarter. The fourth quarter profit may be in the range of $1.6 billion and $1.9 billion amid lower oil prices, according to NewsTalk.

Van Beurden further said: "The completion of the BG transaction, which we are expecting in a matter of weeks, will mark the start of a new chapter in Shell, to rejuvenate the company and improve shareholder returns."

Shell is banking on synergies from the BG combination in addition to a reduction of some 10,000 staff and direct contractor positions will enhance its operational capability. In 2015-16 across both companies, the integration of Shell and BG will continue, he said.

The slump in the global commodity market has adversely been impacting Shell's financial performance for the last few quarters. This further pulled the stock price lower. Shell's stock price tumbled 34 percent in 2015 and shares further fell 20 percent this year so far. 

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