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Shell share price: Group set to unveil deeper cost cuts

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by Tsveta Zikolova

Monday, 06 Jun 2016, 09:25 BST

Royal Dutch Shell (LON:RDSA) is set to lay out plans for deeper cost cuts and a potential delay in its asset sale programme when it updates investors on its strategy tomorrow, The Sunday Times has revealed. The update will come as the group’s chief executive Ben van Beurden is under increasing pressure to justify the £35-billion acquisition of BG Group which completed earlier this year.

Shell’s share price has advanced in London this morning, having gained 1.55 percent to 1,702.00p as of 08:54 BST, and outperforming the benchmark FTSE 100 index which currently stands 0.73 percent higher at 6,254.90 points. The Anglo-Dutch group’s shares have lost some 10 percent of their value over the past year, but are up more than 11 percent in the year-to-date.

The Sunday Times reported yesterday that Shell’s chief executive was expected to reveal deeper cost cuts at the group’s investor day tomorrow. The company has already signalled that more than 10,000 jobs will be cut and has pledged to slash spending from $53 billion (£36.5 billion) to $40 billion a year.

The newspaper quoted Barclays as commenting in a recent note that van Beurden could lop off $3 billion from the $24 billion it spent last year on exploration, as well as cutting deeper into its cost base.

“We see a much larger opportunity available with those costs still 145 percent higher than those recorded in 2005, when Brent also averaged in the $50s,” the analysts said.

Shell’s three-year $30-billion asset disposal programme will also be in focus tomorrow as industry sources told The Sunday Times that with the depressed crude price, the company was finding it hard to attract the bids that it needs to hit its goal. It is understood that van Beurden could lengthen the timeframe for offloading the operations, which, however, would ramp up pressure on the energy major’s balance sheet.

As of 09:26 BST, Monday, 06 June, Royal Dutch Shell Plc ‘A’ share price is 1,702.75p.

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