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Shell looks to cut Americas spending by 20%, extend refinery sales

03.14.2014  | 

It’s “not acceptable” that Shell, now deploying about 36%, or $80 billion of its overall capital in North America, has been losing money, said Ben van Beurden, CEO of Royal Dutch Shell.



Royal Dutch Shell plans to lower spending in the Americas by a fifth as Europe’s largest oil producer focuses on more profitable operations.

It’s “not acceptable” that Shell, now deploying about 36%, or $80 billion of its overall capital in North America, has been losing money, said CEO Ben van Beurden.

Shell expects to reduce capital investment in upstream operations, or exploration and production, in the Americas by 20% this year and North American resource spending by the same proportion, the company said today in a presentation.

“That leaves us with about $10 billion in total for the upstream Americas and about $4 billion for the shale,” chief financial officer Simon Henry said. “Some of that does include Argentina and Canada. It’s not all in America.”

Van Beurden has pledged to shrink spending costs this year and speed up asset sales, including refineries, after The Hague-based company issued its first profit warning in a decade. He also scrapped targets for cash flow, delayed drilling off Alaska and promised to restructure shale operations in North America.

“Upstream Americas profitability has been impacted by losses in resources plays such as shales,” Shell said Friday in a statement. “The company intends to drive hard choices on capital allocation for selective growth and divestment of non- strategic positions.”

Underperforming Areas

Unprofitable shale investments added to a 48% drop in fourth-quarter profit, the Anglo-Dutch company recently said.

“Shell reiterates its aim to improve two underperforming areas,” US shale projects hurt following a rush to expand, and refining and fuel sales, Investec Bank said in a note.

Refining and fuel marketing were weaker than chemicals, lubricants and biofuels, and the company plans to separate those business operations into distinct units, Shell said.

Van Beurden plans to dispose of about $15 billion of assets through 2015. Shell agreed to sell holdings valued at more than $4.5 billion, including in Australia and Brazil, and is seeking buyers for stakes in oil and gas fields, as well as pipeline and fuel-marketing assets from the US to Nigeria. The company may also exit its $6.3 billion investment in Woodside Petroleum.

“We had a good start,” Van Beurden said. Let’s “see whether we need to adjust the number” for the divestment plan.

The CEO and Henry indicated in January that first-quarter profit will be curbed by lower output after the end of a project in the United Arab Emirates and caps on Dutch gas output.

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Paul Robinson

Like the imbecile son of a rich English lord, Vosser and then the present management of Shell don't know how to profit from abundant resources and fail to understand economic cycles. So they are selling off assets to meet a supposed cash-flow crunch, future be damned.

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