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Shell cuts 2020 spending by $5 billion, suspends share buyback

Royal Dutch Shell (RDSa.L) will lower spending by $5 billion and suspended its vast $25 billion share buyback plan in an effort to weather the recent collapse in oil prices, it said on Monday.

The Anglo-Dutch oil major said it would reduce capital expenditure to $20 billion or below from a planned level of about $25 billion while seeking to reduce operating costs by an additional $3 billion to $4 billion over the next 12 months.

The cuts are expected to boost Shell’s cash generation by between $8 billion and $9 billion on a pretax basis.

Shell’s shares were down 3.5% in early London trading, against a 3% for the broader European energy sector .SXEP

Oil prices have crashed by more than 60% since January, hit by global demand destruction because of the coronavirus pandemic and a price war between top producers Saudi Arabia and Russia after this month’s collapse of a supply pact between the Organization of the Petroleum Exporting Countries (OPEC) and its allies.[O/R]

The Shell cuts mirror moves by rivals such as Exxon Mobil (XOM.N), Chevron (CVX.N), BP (BP.L) and France’s Total (TOTF.PA), who have all announced plans for sharp reductions in spending.