Shell announced that it would reduce its planned capital expenditure by 24% from earlier levels of approximately $26.5bn. The company is also planning to reduce its operating expenses by $3-$4bn over the next 12 months compared to 2019 levels.
These measures are anticipated to enhance Shell’s free cash flow by up to $8-$9bn on a pre-tax basis for 2020. Additionally, Shell has suspended its $25bn share buyback programme to cope with the oil price downturn. Moreover, the company has secured a $12bn credit facility to safeguard its dividend distribution plan.
Shell revises CapEx and OpEx to enhance free cash flow
After reducing CapEx guidance for 2020, Shell announced its exit from Lake Charles liquefied natural gas (LNG) project in Louisiana. The company is also postponing FIDs on several upcoming oil and gas fields. This includes the Browse project and Crux expansion project in Australia, the Cambo deepwater oil project in the North Sea and the Bonga Southwest / Aparo in Nigeria.
The Covid-19 outbreak in the UK North Sea region has prompted Shell to postpone the construction of the Shearwater-Fulmar gas pipeline. This development will delay the company’s objective of increasing gas production from the Shearwater platform.
The company also decided to halt the construction at Shell Chemical’s planned Beaver County Complex, one of the largest upcoming petrochemical projects of the company in the US, due to Covid-19.