Sector News

Shell plays down fear of major merger job cuts

April 11, 2015
News
Oil giant Shell has played down concerns that its £47billion proposed “mega-merger” with BG Group will lead to hundreds of further job cuts in the North Sea.
 
Sources have claimed that up to 300 jobs are set to be cut in Aberdeen as the two firms plan to join forces and trim £1.6billion in costs annually. Shell is currently negotiating to cut at least 250 staff and agency contractors from its 4,500-strong North Sea workforce.
 
Combined, BG and Shell will employ 5,500 people in the region and be the biggest oil and gas producer on the UK Continental Shelf.
 
A further 300 jobs would amount to a 10% drop in employee numbers between the two firms.
 
A spokeswoman for Shell said she did not “recognise” the 300 jobs figure, but pointed to chief executive Ben van Beurden’s admission that there are “of course going to be synergies” if the deal goes ahead.
 
The Shell spokeswoman added: “It is far too early to say what the impact could be.”
 
But Mr van Beurden told analysts when the deal was announced on Wednesday that Shell has been “ been working on this proposition for a number of months”.
 
He added: “We have been looking at BG as well as other companies of course for a longer period of time.”
 
The deal is expected to complete in 2016 and faces a number of regulatory hurdles as well as requiring shareholder support.
 
Shell’s bid, which put a 48% premium on the value of BG Group, is thought unlikely to be interfered with by a rival bidder.
 
Likewise, a predicted wave of consolidation – which has given a boost to shares of other oil and gas firms – might not happen.
 
Analyst Neill Morton at Investec said: “We do not expect a rival bid and are wary of this catalysing a flurry of copycat deals.”
 
Also underpinning the deal is an assumption that the price of Brent crude will rise from its current level of around $57 per barrel.
 
Henderson Global Investors said: “In buying BG, Shell is making a bold strategic bet that oil prices will recover towards the $70-$90 level in the medium term.”
 
The merged company will be the world’s biggest international LNG company by the end of this decade.
 
The acquisition will increase Shell’s overall crude oil and natural gas reserves by 25% and 20%, respectively.
 
The merger also allows Shell a share in Brazil’s offshore oil fields and undeveloped oil and gas projects in Australia and East Africa in addition to allowing more participation in the export of LNG from the US.
 
Tom Ellacott, the vice-president of corporate analysis for Wood Mackenzie, said: “‘First mover advantage’ secures Shell industry leading positions in deepwater oil and LNG.”
 
By Erikka Askeland
 
Source: Energy Voice

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