Shell reported updates on 2014 performance and priorities. Shell will cut potential capital investment for 2015-2017 of over $15 billion
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Delivery in 2014 included:
Improved earnings and returns, including $25 billion of free cash flow, underpinning $15 billion of dividends and share buybacks.
Tighter performance management and accountability implemented across the company, including increased shareholding requirements for senior management to further align interests with shareholders.
Restructuring programmes and cost reduction in North America resources plays, where major portfolio changes are now complete; and in Oil Products, where substantial progress has been made and new cost programmes were launched at the end of 2014.
Increased asset sales – some $15 billion in 2014, completed before markets weakened across the end of the year, and reduced capital spending, as we make decisions on portfolio to improve Shell’s capital efficiency.
Successful delivery of new projects including deep water, and successful integration of the LNG portfolio purchased from Repsol, which delivered over $1 billion to CFFO in 2014.
A firm uptick in the 2014 exploration performance, with 10 material discoveries in frontier and heartland basins, and a further 41 near-field discoveries.
Given Shell’s rich portfolio funnel and today’s lower oil prices, investment levels are under severe pressure in the near term. Today’s lower prices are creating opportunities to reduce our own costs and to take costs out of the supply chain, where there is multi-billion dollar savings potential for Shell.
In addition, the company is deferring spending in many areas, without compromising on HSSE, exiting selective growth positions, and driving costs down in the supply chain. This should result in reduction of potential capital investment for 2015-17 of over $15 billion.
2015 organic capital investment is expected to be lower than 2014 levels. Shell is considering further reductions to capital spending should the evolving market outlook warrant that step, but is aiming to retain growth potential for the medium term. ■