Shell CEOs Baptism Of Fire – US-FOREX.US
It’s not easy taking the helm of a company in the midst of an industry slump, but that’s exactly what Peter Voser did a month ago at Royal Dutch Shell. And now the pressure is on for him to expand his cost-cutting drive, after the oil major announced a 70% drop in second-quarter profits on Thursday and said that demand remained “weak.” Shell is one month into Voser’s program, called “Transition 2009,” which has already claimed the scalp of 20% of senior management positions. The new CEO said on Thursday that this would be only the beginning, adding that “substantial” staff reductions were likely to follow. “We are not banking on a quick recovery,” said Voser. “We must do more.”More is clearly what investors will be pushing for. Shell said it had reduced operating costs by 700 million in the first six months of 2009, and is aiming to cut 2010 capital expenditure by over 10%, excluding currency volatility and one-offs. But rival BP
has already achieved an impressive 2 billion in cost savings for the first six months, and promised earlier this week an extra 1 billion in cuts for the rest of the year. Shares of Royal Dutch Shell
ticked up 0.1%, or 2 pence , to 15.90 pounds , during morning trading in London. BP was up 0.7%, while Total
was trading flat in Paris.”The new CEO means Shell will have a new momentum,” said Gudmund Halle Isfeldt, an analyst with DnB Nor, who rates the company a top pick along with BP and StatoilHydro. “There’s potential upside for an investor.”Shell said on Thursday that its second-quarter earnings, on a current cost of supplies basis, had fallen 70%, to 2.3 billion. This was mostly due to the drop in oil prices over the year, down some 50%, but Shell was also hurt by weak natural gas prices, weak refining margins and militant attacks on its operations in Nigeria. Shell’s production levels fell to 2.96 million barrels per day, whereas DnB Nor’s Isfeldt had expected 3.1 million.
But there was some good news at Shell’s marketing and trading division, which reported higher earnings from natural gas and power over the year. “It seems to be that basically the business-to-business trade, within marketing, was quite resilient,” said Isfeldt.