Shell says could exit 10 countries

A horse-drawn funeral carriage passing a Royal Dutch Shell petrol station in Hook, near Basingstoke, on Jan 20, 2016.
A horse-drawn funeral carriage passing a Royal Dutch Shell petrol station in Hook, near Basingstoke, on Jan 20, 2016.PHOTO: AFP

LONDON (AFP) - Energy giant Royal Dutch Shell on Tuesday (June 7) said it could exit up to 10 countries under a previously announced plan to sell oil and gas assets over two years.

Following its recent huge takeover of rival BG Group, the expanded company expects also to make higher cost savings than previously announced, Shell said in a statement.

The Anglo-Dutch group said it anticipated savings of US$4.5 billion (S$6.11 billion) in two years' time, US$1.0 billion more than previously forecast.

In another update, Shell said it had "earmarked up to 10 per cent of... oil and gas production, including five to ten country exits, for disposal".

While planned asset sales remained unchanged at US$30 billion, Shell trimmed 2016 planned investment to US$29 billion, as energy companies worldwide battle low oil prices.

Shell's statement added: "We are announcing an increase in expected deal-related synergies, from the US$3.5 billion set out in the prospectus, to US$4.5 billion on a pre-tax basis in 2018, an increase of some 30 per cent."

Shell shares were trading around 2.7 per cent higher in London afternoon trading, topping the capital's benchmark FTSE 100 index.

The company recently completed a £47-billion (S$92 billion) takeover of smaller British rival BG Group, in a deal aimed at strengthening Shell's position in the liquefied natural gas (LNG) market.

Meanwhile, owing to the takeover as well as low oil prices, Shell is cutting at least 12,500 jobs over two years to the end of 2016.

"By capping our capital spending in the period to 2020, investing in compelling projects, driving down costs and selling non-core positions, we can reshape Shell into a more focused and more resilient company, with better returns and growing free cash flow per share," Shell chief executive Ben van Beurden said in Tuesday's statement as it prepared for a presentation day with analysts.

Shell announced an 89 per cent drop in net profit for the first quarter of 2016, blaming the slump on the price of crude.

The global oil market had nosedived from above US$100 in mid-2014 to 13-year lows of around US$27 in February, plagued by a stubborn supply glut.

But prices have since rebounded to trade at around US$50 a barrel on signs that the market is rebalancing.