Shell cuts 2,200 more jobs to withstand lower-for-longer oil

Royal Dutch Shell Plc will cut 2,200 more jobs, taking the tally of losses to 12,500 between 2015 and 2016 as the world’s second-biggest oil company continues to adjust to the slump in prices.

At least 5,000 jobs will be cut this year, the company said in an e-mailed statement. These reductions are in response to oil prices staying “lower for longer,” and as a result of the acquisition of BG Group Plc earlier this year, said Paul Goodfellow, Shell’s vice president for the U.K. and Ireland. Shell and BG employed about 94,600 people at the end of 2015.

“These are tough times for our industry,” Goodfellow said in a statement. “We have to take further difficult decisions to ensure Shell remains competitive through the current, prolonged downturn.”

The industry is cutting deeper despite oil’s 80 percent recovery since January. Prices remain about half the level of two years ago and companies’ earnings have been pummeled, debt has increased and credit ratings have been cut. To help protect their balance sheets companies have deferred or canceled billions of dollars of projects, renegotiated contracts with suppliers and eliminated thousands of jobs.

Shell’s adjusted net income fell 58 percent to $1.6 billion in the first quarter following the collapse in prices. The company bought BG Group for $54 billion this year to get access to oil and natural gas reserves from Australia to Brazil. The purchase has increased its debt to $70 billion and driven up its ratio of net debt to capital to above 26 percent.

– Bloomberg