THE HAGUE, Netherlands, July 30 (UPI) — After announcing a steep decline in profits for the second quarter Thursday, petroleum company Royal Dutch Shell PLC abruptly announced it will slash 6,500 jobs and reduce energy-related investments by about $7 billion.
Shell’s profits for the second quarter sharply fell by a third, the oil giant said, to $3.4 billion. A year ago, that profit was $5.1 billion, the Wall Street Journal and other business media reported early Thursday.
Analysts believe the most likely cause for the lull in profits is the downturn in oil prices worldwide — particularly in the United States — between last fall and this summer. In the autumn, cheaper oil saw gas prices in the United States dip below $2 per gallon in some states — the lowest price for gasoline in years.
Oil prices have rebounded somewhat, analysts say, but the impact on oil companies’ bottom lines has already been felt.
“We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery,” Shell CEO Ben van Beurden said. “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.”
In its second quarter report, Shell stated it is anticipating another prolonged downturn in oil prices — and is therefore cutting operating costs by $4 billion and reduce capital investment by 20 percent — or about $7 billion. The elimination of 6,500 jobs is part of that measure.
Shell, however, isn’t the only oil giant cutting back on its budget. British Petroleum (BP) announced earlier this week similar cuts following a $6 billion loss it reported. BP’s losses were caused partly by the lower oil market and partly by penalties stemming from its 2010 Gulf of Mexico oil spill, the Journal report said.
Earlier this year, Royal Dutch Shell purchased British multinational oil and gas company BG Group for $70 billion.
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