Total, Shell Announce Multi-billion-dollar Budget Cuts as Oil Continues Decline
Total and Shell each introduced significant cost-reduction measures, as the oil price war and the global spread of Covid-19 combined to disrupt operations.
Following the lead of other supermajors like BP and ExxonMobil, Total and Shell are implementing plans to reduce capital expenditures, operational costs, and cancel planned share buybacks.
Specifically, Total and Shell plan to do the following:
CAPEX reductions. Total will implement CAPEX cuts of more than 20% of their 2020 plan, or more than $3 billion. Shell is reducing their CAPEX to $20 billion or below for 2020, compared to an original plan of approximately $25 billion.
Operational cost reductions. Total plans to identify $800 million in savings in its 2020 operating costs, while Shell will reduce its cash expenditures by $3 – $4 billion over the next 12 months compared to 2019 levels.
Share buybacks. Total is suspending its planned $2 billion buyback for 2020, having already purchased $550 million in shares in the first two months of the year. Shell has decided not to continue with the second tranche of its share buyback program, having completed the first tranche.
Shell said in an emailed statement that its initiatives “are expected to contribute $8 – 9 billion of free cash flow on a pre-tax basis. Shell is still committed to its divestment program of more than $10 billion of assets in 2019-20 but timing depends on market conditions.”