Royal Dutch Shell plc (ADR) (NYSE:RDS.A) announced that it is looking forward to slash 6,500 employees in the current fiscal year and cut capital investment by $7 billion. The company said in a statement today that it is preparing for a prolong downturn.
The independent oil and gas company said that its dividend commitment will remain the same at $1.88 a share for this year. The company also said that, at least the same amount will be given in the next year.
Shell reported its adjusted earnings for the second quarter plummeted to $3.8 billion, versus $6.1 billion in the same period last year. Analysts polled by Bloomberg had predicted earnings of $3.4 billion.
The main reason behind the sharp decline in earnings was lower oil prices that averaged $60 per barrel in the second quarter, well below $110 per barrel one year ago. The refining and trading somehow offset the decline, as profits in these segments more than doubled in Q2 versus last year.
The biggest oil companies across the globe are relying on refinery segments they were downsizing over the last five years in order to cope with lower profits from selling crude oil. The decline in oil prices has pushed the companies to decrease spending and postpone projects to improve their balance sheets.
Shell is anticipating oil prices to increase to $90 per barrel by 2018, defending the 50 percent premium it is paying to acquire BG Group Plc.
Instable oil prices can help Shell, Total SA and BP to boost their profits from oil trading. These companies handle an abundant amount of fuel on daily basis to fulfill the demand of Germany, Italy, Japan, Spain, France and India. The bear market enables them to get greater returns by storing low-priced oil and then sell it later at higher profit margins.
