Shell, BG Group job cuts will rise to 10,000

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HOUSTON — The layoffs that Royal Dutch Shell began last year will increase by a third to 10,000 employees and direct contractors in 2016 once it closes its impending acquisition of BG Group.

The job cuts come as the firms curb operating costs and try to extract synergies from their impending merger. Shareholders will vote to approve or reject the deal next week.

Reporting preliminary fourth-quarter earnings on Wednesday, Shell said it cut $4 billion in operating costs last year and expects to shake out another $3 billion in costs this year. The company says synergies – cutting redundant costs as part of its corporate merger – will support its efforts to cope with the worst downturn in half a century.

“Shell’s drive to improve competitive performance is delivering at the bottom line,” Shell CEO Ben van Beurden said in a written statement.

Shell last year had announced it will cut 7,500 jobs and says it will cut another 2,800 jobs after its BG Group deal closes. The Anglo-Dutch oil giant and BG Group, a British gas producer, had a combined 99,000 employees at the end of 2014, regulatory filings show.

In the fourth quarter, Shell collected between $1.6 billion and $1.9 billion in earnings on a current cost of supplies basis, which is a measure of net income used by some oil companies. That’s down from $4.2 billion in the same three-month period in 2014.

Income from Shell’s oil exploration and production business dropped from $1.73 billion to a range of $400 million to $500 million in the fourth quarter of 2015. Shell’s downstream income held steady from $1.55 billion to a range of $1.4 billion to $1.6 billion.

As crude sinks further below $30 a barrel on Wednesday, Shell said it plans to peel spending plans back further. Its capital investment budget combined with BG Group’s will come in at $33 billion this year, about 45 percent lower than its peak in 2013.

Shell expects its acquisition of BG Group, subject to shareholder approval, will close in a few weeks. The transaction was originally valued at more than $70 billion but the price tag fell as Shell’s share price declined amid anemic crude prices. The Big Oil firm plans to sell off $30 billion in assets over the next three years, on top of $20 billion in sales last year.