Royal Dutch Shell said Thursday it will cut 6,500 jobs as it braces for up to several years of low oil prices.
The company said in its second quarter results that it expects to cut about 6,500 staff and direct contractor positions in 2015, but has not disclosed how those cuts will be distributed.
Shell also slashed its 2015 capital investment budget down to $30 billion, a $3 billion reduction since the company’s last update in April and about $7 billion less than 2014 spending levels.
The company said the reduced spend reflects cost reductions, project cancellations and a re-phasing of growth options.
Shell added that the cost cutting plans are necessary because current low oil prices could “last several years.”
“The company has to be resilient in today’s oil price environment, even though we see the potential for a return to a $70-$90 oil price band in the medium term,” Shell added.
Shell expects operating costs to fall by over $4 billion in 2015 and said it plans to reduce costs further in 2016.
Second quarter upstream earnings climbed to $1.037 billion, up from $675 million last quarter but still down from $4.722 billion booked in the second quarter of 2014.
Downstream profits surged to $2.961 billion, up from $2.646 billion last quarter and $1.347 billion during the same quarter last year.
The company will pay a second quarter 2015 dividend of $0.47 per ordinary share and $0.94 per American Depositary Share.
The company expects asset sales to total $20 billion for 2014 and 2015 combined, despite weak market conditions.
Shell CEO Ben van Beurden said the regulatory filings process and integration planning for its combination with BG Group are “both progressing well.”
“We will re-shape the company once this transaction is complete. This will include reduced exploration spend, a fresh look at capital allocation in longer term plays, and asset sales spanning upstream and downstream. This should concentrate our portfolio into fewer, higher value positions, where we can apply our know-how with better economy of scale. In essence, we ‘grow to simplify’,” van Beurden said.
The $70 billion merger remains on track to be complete by early 2016, as initially planned.