The spending will be lowered by Royal Dutch Shell by $5 billion and its vast $25 billion share buyback plan also suspended in an effort to weather the recent collapse in oil prices.
From a planned level of about $25 billion, its capital expenditure will be reduced to $20 billion or below. Over the next 12 months, the company’s operating costs will be reduced by an additional $3 billion to $4 billion. On a pretax basis, the 2020 spending cuts are predicted to increase the company’s cash generation by $8 billion to $9 billion.
Since early this year, oil has seen its prices crashed by more than 60 percent. It happened as a result of the price war between top producers Saudi Arabia and Russia as well as global demand destruction due to the coronavirus pandemic.
To sustain operations at current output levels, the company requires $20 billion of its capital spending with additional spending dedicated to growing its business, Chief Executive Ben van Beurden said in January.
