Royal Dutch Shell has confirmed it is cutting 10,000 jobs amid its steepest fall in annual profits for 13 years.
It made $1.8bn (£1.23bn) for the fourth quarter of the year, compared with a $4.2bn profit for the same period the year before. Full-year 2015 earnings were $3.8bn, compared with $19bn in 2014.
The oil firm indicated it would report a massive drop in profits two weeks ago and said it would cut 10,000 jobs, partly thanks to its takeover of BG.
Royal Dutch Shell’s chief executive, Ben van Beurden, said: “The completion of the BG transaction, which we are expecting in a matter of weeks, marks the start of a new chapter in Shell, rejuvenating the company and improving shareholder returns.
“We are making substantial changes in the company… as we refocus Shell, and respond to lower oil prices. As we have previously indicated, this will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies.”
He added he would take further action if necessary: “Shell will take further impactful decisions to manage through the oil price downturn, should conditions warrant that.”
At the time of the proposed BG tie-up, oil was trading at about $55 a barrel, but has fallen sharply since then and is currently trading at about $30 a barrel, leading some shareholders to oppose the plan.
Standard Life, a key investor in Royal Dutch Shell, said last month that the price of oil needed to be $60 a barrel for the takeover to make financial sense, but last month, the majority of shareholders in Shell, which is Europe’s largest oil company, voted in favour of that deal.
Shell said it had cut operating costs over the year by $4bn, or around 10%, and expected to cut costs by a further $3bn this year.
The company also cut back hard on investment over the year, with capital spending slashed by $8.4bn from a year ago to $28.9bn.
Shell sold $5.5bn worth of assets in the course of 2015 and is planning to sell another $30bn of assets.Shell’s results are calculated on the basis of replacement cost, which reflects the current cost of supplies and is widely seen as the best measure of an oil firm’s underlying performance.
The drop in the price of oil has been driven by oversupply, mainly due to US shale oil flooding the market.
At the same time, demand has fallen because of a slowdown in economic growth in China and Europe.
The world’s energy watchdog warned recently that the market could “drown in oversupply”.
The International Energy Agency, which advises countries on energy policy, said it expected the global glut to last until at least late 2016.
The most recent worry for investors is the lifting of Western sanctions on Iran which could worsen the existing oversupply problem, with the country’s deputy oil minister, Roknoddin Javadi, predicting it can produce an extra 500,000 barrels per day.