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Shell Trying To Tighten Grip On Its American Oil

CommoditiesMar 13, 2014 09:30AM ET
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By Meagan Clark - Royal Dutch Shell’s (NYSE: RDS.B) CEO Ben van Beurden said Thursday that a tighter grip on its Upstreams Americas business will be integral to its plan to grow cash flow and improve returns.

Losses in resource plays such as shales have impacted Upstreams Americas' profitability, Shell said in a statement on its 2014 Management Day in London. Shell is cutting spending in 2014 by 20 percent compared to 2013 and redirecting onshore investment in Upstream Americas to the lowest cost gas acreage with the best integration potential and to exploration in liquids-rich shales. Shell expects profitable growth to continue in deep-water and heavy oil.

“Shell has a strong asset base and industry leadership in many of its growth themes,” van Beurden said. “While this position of strength gives confidence for the future, it is also clear that we need to get a tighter grip on performance management in Shell. I am determined that, by focusing sharply on our three key priorities – better financial performance, in particular in our Upstream Americas and Downstream businesses, enhanced capital efficiency, and continuing strong project delivery, we will continue to grow our cash flow and improve our returns.”

He also said Shell is determined to deliver a better performance of its asset portfolio this year.

"With sharper accountability in the company, this approach will target growth investment more effectively, focus on areas of the business where performance improvement is most required, and drive asset sales from non-strategic positions,” van Beurden said.

Shell plans to improve growth in upstream businesses that are delivering high returns and strong cash flow. About $35 billion in investments are planned for 2014.

In the short-term, Shell expects cash flow from deep-water projects. In the long-term, Shell plans to identify and mature opportunities in Iraq, Kazakhstan and Nigeria, the latter where thieves have been siphoning off $3 to $8 billion in oil a year and damaging pipelines, according to a report by the Chatham House.

"We are taking stock of our investment opportunities and operating positions,” van Beurden said. “Are our assets attractive economically, and are they resilient to industry cycles? Are our plans credible, are they competitive and are they affordable? This approach is driving hard choices on today's asset base, new opportunities, and disposals plans, where we have recently announced exits from Australia and Italy downstream, Wheatstone LNG in Australia, and US gas-to-liquids."

So far this year, Shell has sold $4.5 billion in assets as part of its 2014-2015 $15 billion asset-shedding program. 

Shell Trying To Tighten Grip On Its American Oil

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