Shell Tightens Belt Amid Pandemic

Shell Tightens Belt Amid Pandemic
Shell has embarked on a series of operational and financial initiatives that are expected to contribute $8-9 billion of free cash flow on a pre-tax basis.

Shell revealed Monday that it has embarked on “a series of operational and financial initiatives” that are expected to contribute $8-9 billion of free cash flow on a pre-tax basis.

The initiatives are expected to result in the reduction of underlying operating costs by $3-4 billion per annum over the next 12 months, compared to 2019 levels, and the reduction of cash capital expenditure to $20 billion or below for 2020, from a planned level of around $25 billion, Shell outlined. They are also expected to result in “material reductions” in working capital, according to Shell.

Shell’s board stated that it has decided not to continue with the next tranche of the share buyback program following the completion of the current share buyback tranche. The company said it is still committed to its divestment program of more than $10 billion of assets in 2019-20 but added that “timing depends on market conditions”.

“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,” Shell CEO Ben van Beurden said in a company statement.

“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,” he added.

“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,” Beurden continued.

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

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