From a Shell Press Release
Key features of Royal Dutch Shell Plc SECOND quarter 2009
Royal Dutch Shell Chief Executive Officer Peter Voser commented:
Our second quarter results were affected by the weak global economy. This weakness is creating a difficult environment both in Upstream and Downstream.
Energy demand is weak. There is excess capacity in the market, and industry costs remain high.
Conditions are likely to remain challenging for some time, and we are not banking on a quick recovery. Shell is adapting to this new situation, and we must do more. We are sharpening our focus on delivery and affordability.
We are in the middle of a programme to build 1 million barrels of oil equivalent per day (boe) of additional Upstream capacity, with selective Downstream investment.
New production start-ups in the first half 2009, at Sakhalin II in Russia, and Parque das Conchas (BC-10) in Brazil are important milestones in the delivery of this strategy.
This is the most competitive programme in our industry, and managing affordability in todays climate is a key priority for Shell.
Taking new steps to reduce our costs, combined with Shells financing capabilities, allows us to continue with our investments for medium term shareholder value, despite todays tough market conditions.
Shell has a number of initiatives underway to reduce costs. Through a combination of self-help, reduced supply-chain costs, and lower discretionary spending, we have reduced operating costs by $0.7 billion in the first half 2009, compared to the first half 2008. This reduction excludes the impact of exchange rate movements and non-cash pension costs. We expect to reduce 2010 organic capital spending by over 10% compared to 2009 levels, to around $28 billion.
A new restructuring programme – called Transition 2009 – which we announced in June, will be completed by the end of this year. This will simplify Shell, and increase personal accountabilities. The top 600 management positions in the new organisation have been announced. This has enabled us to reduce the number of senior management positions by 20%, and substantial further staff reductions are likely.
Looking beyond 2009, Shell needs to become a more efficient company, with faster decision-making, sharper implementation of strategy, and more focus on costs and value. The Transition 2009 programme is the beginning of that change.
Further out, beyond 2012, we have an industry-leading Upstream option set that can deliver growth to 2020. In addition, we continue to find new fields through exploration. The 6 notable discoveries in the first half of 2009 contribute to at least 0.7 billion boe of new resources potential.
We are keeping our pre-FID options warm, but managing affordability and profitability are key priorities.
The industry outlook remains a challenging one, despite the rally in oil prices in recent months. We are taking steps to improve our performance, to bridge the company, and our shareholders, into a period of significant growth in the coming years.