Royal Dutch Shell announced on Monday it will trim spending by around $9 billion to reinforce its financial strength and resilience, Kallanish Energy reports.
The Anglo-Dutch oil major will cut its underlying operating costs by $3-4 billion per year over the next twelve months, compared to 2019 levels; will reduce cash capital expenditure to $20 billion or below for 2020 (from $25 billion planned); and will implement “material” reductions in working capital.
The supermajor is also cancelling the next tranche of its share buyback program, following the completion of the current tranche. These “decisive” initiatives are expected to generate $8-9 billion of free cash flow on a pre-tax basis.
Shell noted its financial resilience is fundamental to continued investment in its strategic priorities. It will review the “dynamically evolving business environment” and is prepared to take further strategic decisions if necessary, the company said in a statement.
CEO Ben van Beurden praised staff and contractors across the world for maintaining their focus on safe and reliable operations, while also ensuring their own health and welfare and that of their families, communities and customers.
“The combination of steeply falling oil demand and rapidly increasing supply may be unique, but Shell has weathered market volatility many times in the past,” he said, noting the company will be well-positioned for the eventual global economic recovery.
The $10 billion divestment program planned for 2019-20 will continue, but the timing of the asset sales will depend on market conditions, Shell noted.
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