Shell cuts spending in U.S. to lower shale exposure
By Karolin Schaps and Dmitry Zhdannikov
LONDON (Reuters) - Royal Dutch Shell (RDSa.L: Quote) will cut spending by a fifth and lay off staff at its American exploration and production business, the company said on Thursday, in another sign that oil majors are struggling to profit from the booming U.S. shale sector.
Oil and natural gas pumped from North American shale have proved a boon for many smaller energy businesses, but the world's biggest oil companies, including BP (BP.L: Quote) and Exxon Mobil (XOM.N: Quote), have had less success unlocking the prolific rock's full potential.
London-based BP announced last week that it is to spin off its onshore U.S. oil and gas assets into a separate business to improve performance.
"Financial performance there is frankly not acceptable ... some of our exploration bets have simply not worked out," said Ben van Beurden, who was head of refining before being promoted to Shell's top job at the start of the year.
Oil companies active in North American shale have broad exposure to profit-sapping U.S. natural gas, prices of which fell to their lowest in a decade during 2012 but rebounded as a cold winter depleted gas in storage.
Sentiment on the outlook for the fuel is improving with the prospect of liquefied natural gas (LNG) exports and increased industrial use, but uncertainty remains.
The spending cuts announced on Thursday follow Shell's decision in January to suspend its controversial Arctic drilling program and pledge to cut capital expenditure and streamline operations worldwide after the company's least profitable fourth quarter in five years. Continued...