Royal Dutch Shell is halting the next phase of its $25 billion share buyback program along with lowering capital expenditures by $5 billion. The company also said it would reduce operating costs by $3 billion to $4 billion over the next year.
The cuts are expected to boost Shell’s cash generation by $8 billion to $9 billion on a pre-tax basis.
“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,” Ben van Beurden, Chief Executive of Royal Dutch Shell, said in a statement. “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,” he added.
This move by the company was not a surprise to many in the industry as the company previously stated that it would miss its buyback target if global markets did not improve. Shell said it has around $20 billion of cash on hand and $10 billion of undrawn credit should it need it.
As crude prices plunge to the lowest level in two decades, Shell is joining a growing list of energy companies looking to shore up costs. The move follows similar steps by Exxon Mobil, Chevron, BP, France’s Total, Italy’s Eni SpA and Norway’s Equinor ASA.
Shell’s most recent announcement did not mention cutting dividends. The company has not cut its dividend since the Second World War.
Source: Equities News