Shell to cut operating costs by $4bn

24 March 2020

Shell will cut its operating costs by up to $4bn in 2020 as Covid-19 leads to falling oil demand. 

The firm said it was taking decisive action to reinforce the financial strength and resilience of the business so it is “well-positioned for the eventual economic recovery”.

Over the next year, Shell said it would reduce its underlying operating costs by $3-4bn, compared to 2019 levels. It will also reduce its capital expenditure to $20bn or below, from a planned level of $25bn.

Shell said the combination of the initiatives would contribute $8-9bn of free cash flow on a pre-tax basis.

Ben van Beurden, chief executive officer of Royal Dutch Shell, said: “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. 

“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.”

Shell added it would continue to review the “dynamically evolving business environment” and take further strategic decisions and consider changes to the overall financial framework as necessary.

Earlier this month, the International Energy Agency estimated in a worst-case scenario the pandemic could lead to a drop in consumption by 700,000 barrels per day.

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