Shell will reduce cash capital expenditure by $5 billion to $20 billion or below for 2020 in response to steeply falling oil demand and rapidly increasing supply.
The cut is one in a series of operational and financial initiatives that, together, are expected to contribute $8-9 billion of free cash flow on a pre-tax basis. The initiatives are also expected to reduce underlying operating costs by $3-4 billion/year over the next 12 months compared to 2019 levels and reduce working capital.
The company is still committed to its divestment program of more than $10 billion of assets in 2019-20 but timing depends on market conditions. Divestments of around $5 billion were completed in 2019.
The next tranche of the company’s share buyback program will not continue. The current share buyback tranche refers to the $1 billion share buybacks announced on Jan. 30.
Shell holds around $20 billion in cash and cash equivalents, $10 billion of undrawn credit lines under revolving credit facility, and access to commercial paper programs.
Shell will publish its next quarterly update on Mar. 31 and release its first quarter results on Apr. 30.
