Major oil producer, Royal Dutch Shell, has hinted on reducing jobs of about 7,000 to 9,000 to save up to $2.5 billion by 2022.
The Chief Executive Officer, Ben van Beurden, revealed this in an interview on Wednesday 30th September, 2020 saying the move is expected to deliver sustainable annual cost savings between $2 to $2.5 billion by 2022.
This will partially contribute to the announced underlying operating cost reduction of $3 to $4 billion by the first quarter of 2021.
According to Shell, aside the plan to reduce jobs of 7,000 to 9,000, about 1,500 people have agreed to take voluntary redundancy this year ahead of the layoff expected to happen by 2022.
In the upstream sector, Shell said it expects production to be between 2,150 and 2,250 thousand barrels of oil equivalent per day, which includes a production impact of 60 to 70 thousand barrels of oil equivalent per day from hurricanes in the US Gulf of Mexico.
In its report for the Third Quarter of 2020, it stated that Shell realised liquids prices in the first two months of the quarter which reflected a 15 to 20 per cent discount to Brent, similar to the discount in the second quarter of 2020.
It disclosed that realised gas prices are trending in line with Henry Hub. Depreciation is expected to be at a similar level as in the second quarter of 2020.
In the area of gas, Shell said it expects production is expected to be between 820 and 860 thousand barrels of oil equivalent per day and LNG liquefaction volumes are expected to be between 7.9 and 8.3 million tonnes.
Trading and optimisation results are expected to be below average.
A one-off tax charge is expected to have a negative impact on Adjusted Earnings in the range of $100 to $200 million; no cash impact is expected in the third quarter.
Approximately 80 per cent of Shell’s term sales of LNG in 2020 have been oil price linked with a price-lag of up to 6 months. Consequently, lower realised prices due to this price-lag are expected to have a significant impact on LNG margins in the third quarter.
Shell said that cash flow from operations (CFFO) can be impacted by profits gained from movements in the forward commodity as it curves up until the last day of the quarter.