SHEL Shell Plc

Company vowed to lower its spending further after sharp drop in earnings

By Sarah Kent 

LONDON -- Royal Dutch Shell PLC plans at least another 2,200 job cuts this year, part of the oil group's effort to adjust to low crude prices while integrating the recently acquired BG Group.

The Anglo-Dutch oil giant had made it clear it would slash thousands of jobs after its roughly $50 billion takeover of BG, but the latest reductions announced on Wednesday would bring the total number cut this year to "at least" 5,000 globally. The reductions would offset the addition of BG's 4,600 staff and bring the total number of job cuts at Shell since 2015 to 12,500.

Shell is just one of many oil companies trying to reduce costs fast to combat a dramatic slump in oil prices over the past two years, even though oil prices have rebounded off lows at the start of the year of below $30 a barrel.

Across the industry, companies have slashed billions from their spending plans and fired thousands of employees to manage the sharp market downturn amid a global glut of crude.

"These are tough times for our industry and we have to take further difficult decisions to ensure Shell remains competitive through the current, prolonged downturn," said Paul Goodfellow, Shell Vice President for the U.K. and Ireland in an emailed statement.

Shell reported an 83% drop in first-quarter earnings from the same period last year, vowing at the time to bring down spending further.

Just months into its acquisition of BG, management faces the challenge of delivering on promised merger-related savings. Shell is counting on the acquisition of BG to give it a dominant foothold in lucrative liquefied natural gas markets and deep water oil fields offshore Brazil. Some shareholders criticized the deal as too expensive.

"We need to reduce our cost base, improve production efficiency and have an organization that best fits our combined portfolio and business plans, " Mr. Goodfellow said.

In the U.K. and Ireland, the company plans to reduce staff working in exploration and production by 475.

Write to Sarah Kent at sarah.kent@wsj.com

(END) Dow Jones Newswires

May 26, 2016 02:48 ET (06:48 GMT)

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