Shell, BP and other oil firms plan major cuts amid the petrol pump price crash, while a British defence firm is not fazed by a plunge in profits.
The drop in petrol prices at the pump is great for consumers, but it will undoubtedly lead to major job cuts at oil companies as they scale back on their development projects. The bad news will come thick and fast, as several corporations line up to report their fourth-quarter 2014 (Q4) financial results. Royal Dutch Shell said at the end of January that its spending plans will be slashed by $15bn. The company reported that Q4 profits fell to $3.26bn from the previous quarter’s $5.85bn. Despite this recent downward tendency, profits in 2014 saw a 14 per cent rise to $19bn, compared with 2013.
However, Shell’s CEO, Ben van Beurden, warned that while the group did not want to overreact to the oil price falls, it would be seeking much greater ‘efficiencies’. Projects would be put on hold and exploration spending would be frozen. Future spending could be cut even further, he suggested.
The impact on jobs at Shell has so far not been specified. But in December last year BP had already indicated that it would need to cut costs and shed thousands of jobs as it seeks to streamline the group and focus its operations more narrowly. It had already pencilled in a ‘restructuring charge’ to its 2015 accounts amounting to $1bn - mainly for prospective redundancies, but also as a result of plans to dispose of around $10bn worth of its assets. The job losses are expected to include around 200 staff working at BP’s North Sea business.
However, the company also warned that its announced cost-cutting plans - which it said would range from $1bn-$2bn in 2015 - might need to be reviewed again in light of current oil price falls.
Over at French oil group Total, the picture is no less grim. The company recently suggested that planned cuts in 2015 would need to be more severe than expected because of oil prices. Total said last month it expected to cut capital spending in 2015 by $2bn-$3bn, equivalent to around 10 per cent of spending last year. A freeze on hiring staff is also mooted for the whole of 2015.
Meanwhile, British firm Premier Oil said it would cut pay rates for contractors and freelance workers engaged in North Sea projects. It said the change was in line with what rivals were doing across the sector. The company added that if oil prices continued to fall, it may have to halt plans to begin oil production off Norway, at its Bream project.
Unsurprisingly, companies that provide services to oil majors also have to make cuts. The world’s largest oil services group, Schlumberger, recently said it would need to shed 9,000 jobs following the slide in oil prices. The global company’s capital spending is expected to fall by a third to $3bn this year.