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Over 400 hundred British Shell managers being axed

From The Times
October 30, 2009

Hundreds of British managers to go as Shell steps up restructuring drive

Robin Pagnamenta Carl Mortished

More than 400 British managers in Royal Dutch Shell are facing the axe this Christmas as the oil giant intensifies a drastic restructuring drive.

Peter Voser, the new chief executive of the Anglo-Dutch group, announced yesterday that 5,000 jobs worldwide would be cut by the end of this year as the company reported a 73 per cent collapse in third-quarter profits from $10.9 billion (£6.6 billion) last year to $3 billion.

Shell, whose weak results contrasted with robust earnings reported by BP, its rival, on Tuesday, said that more than half the cuts in its Transition 2009 programme would fall in the UK, the US and the Netherlands.

It declined to offer further details. However, based on current projections of a 5 per cent reduction in its overall headcount of 100,000, Shell is on track to cut its 8,500-strong UK workforce by about 425.

Many of those job losses will be at its upstream operation in Aberdeen and its London corporate affairs office.

Shell said that up to 30 per cent of senior management roles had been cut from some business areas in the restructuring, which was launched by Mr Voser at the end of May.

Simon Henry, the chief financial officer, said: “We are moving very quickly and are at the period of maximum change and uncertainty.” He added that 15,000 staff were currently reapplying for new jobs at Shell.

Mr Henry said that by stripping out duplication and simplfying the business, the changes had already allowed Shell to chop $1 billion from its costs this year but he gave warning that the company would need to pay out “several hundred million dollars” in redundancy payments in the final three months of the year.

He said that the bulk of cuts were in the company’s “decision-making apparatus” and that the areas most heavily hit included Shell’s upstream Americas, contracting and procurement and business development units.

Shell blamed the recession, a weakening of oil prices and the company’s stagnating upstream oil and gas production for eating into its revenues and margins. Total sales fell 43 per cent to $75 billion.

Richard Griffith, oil analyst for Evolution Securities, said that Shell’s results looked feeble in comparison with those of BP, which smashed analysts’ forecasts when it this week announced earnings that were 50 per cent higher than had been predicted.

While Shell’s output stayed almost static, at 2.93 million barrels per day, BP reported a 7 per cent surge in its production.

Shell also disappointed investors by pledging to freeze its dividend for the foreseeable future, whereas analysts now expect BP to consider raising its payout as soon as February.

Shell’s upstream earnings from producing crude oil and natural gas were hammered in the three months to the end of September, falling by 82 per cent to $1.5 billion, in large part because of the fall in crude oil and natural gas prices, compared with the third quarter of last year.

Downstream profits also suffered as a result of slim margins and a 4 per cent decline in sales because of weak demand from consumers and industry for oil products and chemicals.

Adding to the gloomy outlook for Shell, Mr Henry said that European oil demand could now be in permanent decline.

“We genuinely don’t see any signs of the market turning,” he said, although he added that there was room for greater optimism in China, India and the US.

Mr Henry said that the group was also seeking to drive down costs in its supply chain by striking new deals with suppliers of everything from pipes to steel and cement.

Shares in Shell fell by 56½p, or more than 3 per cent, to £18.13.

TIMES ARTICLE

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