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Shell unveils operational and financial cuts

Mar 23, 2020
3 min read
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Shell says it is taking decisive action to reinforce the financial strength and resilience of its business so that the company is well-positioned for the eventual economic recovery.

As the COVID-19 virus spreads across the world - seriously impacting people’s health, our way of life and global markets - Shell is putting the safety and health of our people and customers first, along with the safe operations of all our businesses.

 “As well as protecting our staff and customers in this difficult time, we are also taking immediate steps to ensure the financial strength and resilience of our business,” said Ben van Beurden, Chief Executive Officer of Royal Dutch Shell. “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.”

“In these very tough conditions, I am very proud of our 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 our customers.”

In order to deliver sustainable cash flow generation, Shell said it is actively managing all of its operational and financial levers – from focusing on maintaining safe and reliable operations each day to reducing capital spend and operating expenses.

Shell announced that they have embarked on a series of operational and financial initiatives that are expected to result in:

  • reduction of underlying operating costs by $3-4 billion per annum over the next 12 months compared to 2019 levels;
  • reduction of cash capital expenditure to $20 billion or below for 2020 from a planned level of around $25 billion; and
  • material reductions in working capital.

Shell said that together, these initiatives are expected to contribute $8 - 9 billion of free cash flow on a pre-tax basis. Shell is still committed to its divestment programme of more than $10 billion of assets in 2019-20 but timing depends on market conditions.

Shell said its Board has decided not to continue with the next tranche of the share buyback programme following the completion of the current share buyback tranche.

“In the current environment, Shell’s financial resilience is fundamental to continued investment in our strategic priorities. Shell seeks to maintain strong financial credit metrics and ensure it has a robust balance sheet to manage volatility. Shell’s liquidity remains strong, with around $20 billion in cash and cash equivalents, $10 billion of undrawn credit lines under our revolving credit facility and access to our extensive commercial paper programmes,” Shell said.

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