The damage being inflicted by the slump in the oil price was laid bare as Royal Dutch Shell and the British Gas-owner Centrica announced more than 12,000 job cuts between them.
Centrica is shedding 6,000 jobs, mainly in the UK, while Shell said it would axe 6,500 staff and contract positions worldwide this year, including 750 in the North Sea.
Shell also announced plans to reduce capital expenditure by $7bn (£4.5bn), or 20 per cent, this year and raised the prospect of further cuts in 2016 as it warned that oil prices could remain depressed for several years.
The company, which is in the process of a £55bn merger with rival BG Group, said that falling oil prices had fuelled a 38 per cent drop in second-quarter profit to $3.25bn.
“We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery,” said Shell’s chief executive, Ben van Beurden. “We’re taking a prudent approach, pulling on powerful financial levers to manage through this downturn, always making sure we have the capacity to pay attractive dividends to shareholders.”
He added that the BG deal was “on track” and would pave the way for further cost reduction across the newly created business.
“We will reshape the company once this transaction is complete. This will include reduced exploration spend, a fresh look at capital allocation in longer-term plays, and asset sales spanning upstream and downstream,” Mr van Beurden explained.
Centrica also suffered from the collapsing oil price, with profits at its oil and gas production division plummeting by 78 per cent to £116m in the second quarter.
Although the job cuts at the group will be across the business and worldwide, many are expected to be in the UK after the chief executive Iain Conn said he was cutting back on both exploration and production in the North Sea as well as power generation.
The price of oil has tumbled over the past year with the US shale boom causing a glut in supply. Hopes that the price was beginning to rebound have been dashed in recent weeks following an international agreement to relax restrictions on Iranian oil exports, in return for curbing its nuclear programme. The benchmark Brent crude oil index averaged $62 a barrel in the second quarter, down from $110 a year earlier. It is currently trading around $54.
Centrica’s main energy supply business fared much better in the second quarter, with profits doubling to £528m.
Mr Conn, who arrived last year from BP, said the company would cut costs by £750m over the next five years, reversing many of the decisions taken by his predecessor. It is also cutting its interim dividend by 30 per cent, in a move that will affect more than half a million small shareholders.
Centrica said that it would focus on being a customer-centred company in future, scaling back its energy production and exploration arms while selling its wind farm business.
The job reductions represent around a sixth of the 37,500-strong workforce, although the energy group said it expected net job losses to be just 4,000.
Centrica reported a 2 per cent fall in revenue to £15.5bn for the first half of the year, with total adjusted operating profit down 3 per cent at £1bn.
Mr Conn said that the residential supply business would perform much worse in the second half of the year after it cut prices by 10 per cent.
Shell said the 6,500 positions being lost this year had already been announced. The number includes 500 job losses in the UK North Sea and 250 in the Norwegian North Sea.Reuse content