Company of the week; Royal Dutch/Shell Group

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The Independent Online
ROYAL DUTCH/SHELL GROUP, the world's biggest publicly traded oil company, said it will take a charge of $4.5bn (pounds 2.68bn) to sell assets and cut staff in a major reorganisation aimed at bolstering earnings cut by oil prices near their lowest levels in 12 years.

The Anglo-Dutch oil company said the measures will save $2.5bn by 2001 and leave Shell able to weather oil prices of less than $10 a barrel. Benchmark Brent crude oil at $9.98 a barrel is less than half last year's peak price.

Shell is eager to revive flagging returns and bolster its position as competitors such as Exxon and British Petroleum pursue multi-billion-dollar acquisitions to create companies that rival its size. The moves, presented at meetings with analysts last week in London and New York, are the most detailed to date on the strategy of Chairman Mark Moody-Stuart, who assumed the post on 1July.

"Shell has been threatening to do this for a long time," said Rosario Ilacqua, senior oil analyst at Rothschild in New York. "It makes Royal Dutch stock look more interesting than it has been in a while."

Not all investors agreed. The shares fell initially by 1 per cent and were little changed by the end of the week. Analysts said this reflected Shell's bleak forecast for oil prices, questions over Shell's ability to meet its targets, and disappointment that the company isn't bidding for one of its rivals such as Chevron or Texaco. The company has cut its target for returns on capital invested to 14 per cent from 15 per cent last year.

The company plans to sell 40 per cent of its chemicals portfolio to focus on the commodity petrochemicals business closely linked to oil refining. These assets could be worth about $7.7bn but the company may have difficulty achieving the sales as chemicals prices are depressed. It is also looking for a partner for its Montell unit, 15 months after it paid $2bn for the 50 per cent of the plastics maker it did not already own.

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