Shell to cut 5,000 jobs by the end of the year after profits slump
- Thursday, October 29, 2009, 15:06
- Business, Featured Daily News
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• Oil company reported a 72% slide in third-quarter profits
• Half the job losses to take place in UK, US and the Netherlands
Royal Dutch Shell has announced that it will cut 5,000 jobs by the end of the year, many of them in the UK, as part of its major cost-cutting drive to help offset a slump in profits and weak prospects next year.
The Anglo-Dutch oil company, reporting a 72% slide in third-quarter profits this morning, said that staff in its upstream division would have to reapply for 15,000 new positions being advertised internally as part of its restructuring programme, “Transition 2009″.
Of the division’s 50,000 workforce – which is half the company’s total – 5,000 people would lose their jobs as a result of the process, said finance director Simon Henry. This would involve more than a fifth of its most senior managers being made redundant. Over half the job losses will take place in corporate offices in the UK, US and the Netherlands, but Henry did not give a breakdown.
He said that the company would book a restructuring charge of “hundreds of millions” of dollars at the end of the year to cover the redundancy payouts to staff leaving the company.
Henry added that Shell had already saved $1bn in the first nine months of the year, but would not comment on how much Transition 2009 would save the company in total.
Shell’s earnings for the three months to the end of September were $3bn, compared to $10.9bn last year, mainly as a result of a slump in oil, gas and liquefied natural gas prices. Henry said that Shell sold most of its gas and LNG under contracts linked to the oil price but with a six-month lag. This meant that, despite the recent rally on the oil markets, Shell’s earnings from gas and LNG would continue to be anaemic for some time.
He added that there were “few if any signs of a recovery” in Europe to bolster profits at Shell’s downstream refining business, which also remained weak in the US.
The company said it was on track to spend between $31bn and $32bn on new projects this year, partly through increasing borrowings. Henry said that projects which would bring on stream an extra 1m barrels of oil per day (bpd) – out of current production levels of almost 3m bpd – were currently under construction, and would start to come on stream in 2011.
Shell’s existing oil fields are declining at a rate of about 5% per year, which means production levels are likely to fall next year before the big projects currently under development, such as Qatar, Canada and Brazil, start producing.
Shell paid $2.7bn in dividends to shareholders in the third quarter, slightly up on last year, in line with its policy of increasing payouts by the level of inflation or more. But Henry repeated warnings that the company might have to freeze dividends next year.
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