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Shell to take $4.5B charge
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December 14, 1998: 10:41 a.m. ET
Company paring chemical unit, sees further job cuts from restructuring
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NEW YORK (CNNfn) - Royal Dutch/Shell Group will take a $4.5 billion after-tax charge in the fourth quarter for a restructuring that includes the sale of 40 percent of its chemicals group and an effort to cut oil production and refinery costs, the company said Monday.
"I am absolutely clear that our group's reputation with investors is on the line," Chairman Mark Moody-Stuart said in confirming the anticipated restructuring.
But while saying that the company has looked into the possibility of merging with another company, Moody-Stuart said Shell has the capacity to improve its financial situation on its own.
"We are large enough to be the leading company on our own without any merger," said Moody-Stuart. "We have to focus on producing the same outstanding growth in dividends and shareholder value that Shell has delivered for the last half a century."
Moody-Stuart said the company will continue to look at merger possibilities "and if the right opportunity arises, we will act."
Shell said the restructuring will result in further reductions in a workforce that already has been cut by 4,000 in recent weeks. But Moody-Stuart declined to specify how many jobs will be lost, saying "that will be part of legal consultation processes in many countries around the world.
The company said the restructuring is necessary because of continuing weakness in crude oil prices. Moody-Stuart said Shell expects the price of Brent crude to average $14 a barrel over five years, well below the average of the past two decades, and sees a maximum of 2 percent in global economic growth.
But Moody-Stuart said Shell is promising a 14 percent return on capital in 2001, below the 15 percent originally promised when oil prices and projected economic growth were higher. He said Shell will remain financially "robust" even if Brent crude remains near the current $10 a barrel level.
The prolonged slump in world oil prices has led to speculation about consolidation in the oil industry. That speculation was accelerated earlier this month when Exxon and Mobil announced their $80 billion merger.
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Royal Dutch/Shell
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