The Hague-based LNG giant Shell said on Monday it plans to heavily reduce operating costs and spending to help mitigate the impact of the coronavirus outbreak and tumbling oil prices.
Shell said in a statement it would reduce 2020 cash capital expenditure to $20 billion or below from a planned level of around $25 billion.
The company said it would also reduce underlying operating costs by $3-4 billion per annum over the next 12 months compared to 2019 levels and make “material reductions in working capital”.
According to Shell, these initiatives would contribute $8 billion-$9 billion to free cash flow on a pre-tax basis.
Shell is still committed to its divestment programme of more than $10 billion of assets in 2019-20 but timing depends on market conditions, it said.
As part of the measures, the board of Shell has decided not to continue with the next tranche of the company’s share buyback programme following the completion of the current share buyback tranche.
“We will continue to review the dynamically evolving business environment and are prepared to take further strategic decisions and consider changes to the overall financial framework as necessary,” Shell said.
“Shell seeks to maintain strong financial credit metrics and ensure it has a robust balance sheet to manage volatility. Shell’s liquidity remains strong, with around $20 billion in cash and cash equivalents, $10 billion of undrawn credit lines under our revolving credit facility and access to our extensive commercial paper programmes,” Shell added.