Shell slashes 6,500 jobs and spending on 'prolonged downturn'

Shell will cut 6,500 jobs and slash its capital spending this year as it seeks to cope with low oil prices.

The Dutch giant said on Thursday it was planning for a “prolonged downturn” in the oil industry. It reported second-quarter earnings, on a current cost of supplies basis, of $3.1bn (£2bn), down from $5.1bn last year.

It meant earnings per share were down 37pc, Shell said, as excluding identified items, earnings fell from $6.1bn to $3.8bn.

In response, Shell said it will further reduce 2015 capital investment to $30bn, down by 20pc from a year ago as it expects the downturn in oil prices to "last for several years."

Ben van Beurden, Shell’s chief executive, said the company was competing well in a difficult market.

“Shell’s integrated business and our performance drive are helping to mitigate the impact of low oil prices on our bottom line," he said.

“As our results today show, we’re successfully reducing our capital spending and operating costs, and delivering a competitive performance in today’s oil market downturn.”

“We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery. We’re taking a prudent approach, pulling on powerful financial levers to manage through this downturn, always making sure we have the capacity to pay attractive dividends for shareholders.”

Shell said that in the medium term it “saw potential” for oil to return to $70 to $90 per barrel, it would continue to cut costs through the rest of 2015.

Some 6,500 staff and direct contractor jobs will go and the company will review its ongoing projects for affordability and growth potential.

Shell said its takeover of BG remained on track despite the depressed oil price. Mr van Beurden claimed the deal would be “a springboard to change Shell into a simpler and more profitable company”.

“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’”.

Shell shares were up more than 2.5pc in early trading.