Royal Dutch Shell abandons Arctic drilling project

Royal Dutch Shell Plc announced that it has decided to suspend its controversial drilling in Arctic waters off Alaska as part of a multibillion-dollar scaling back of spending on new projects under Ben van Beurden, who is the new Chief Executive Officer of the company.

Today the oil company announced that an appeals decision of the U.S. court earlier in January, which provoked the granting of licences in the Chukchi Sea off northwest Alaska, had incited it to suspend its plans for further exploration in the area in question. The statement of the companys Chief Executive Officer Mr. van Beurden was cited by the Financial Times: “This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014.”

The new Chief Executive Officer took the position in January and prepared some plans, which include some sharp cuts in the investment spending of the company in 2014 as well as some further disposals to drive cash flow. The decision of Royal Dutch Shell to abandon Arctic drilling is a consequence of these plans.

Royal Dutch Shell posted total capital spending of 46 billion dollars last year, including 8 billion dollars of acquisitions. The company forecast that its capital spending would decrease by 9 billion dollars to 37 billion dollars in 2014. The CEO of the company Mr. van Beurden said for the Financial Times that these measures would be marked by “hard choices on new projects, reduced growth investment, and more asset sales”. He also explained that the threat of restructuring is faced by some areas of the companys operations. “She;; had lost operations focus in some areas”, added Mr. van Beurden.

Some further hits concerning the companys global business were given by Shells Chief Executive Officer. The words of Mr. van Beurden give grounds to some analysts to consider that the companys global business may become more focused on writedowns or disposal as part of an asset sale programme, which is expected to raise 15 billion dollars over the next couple of years.

According to CNN Money, the current share price of Royal Dutch Shell Plc is 0.06% down, and its one-year return rate is 1.08% down. The 28 analysts offering 12-month price forecasts for Royal Dutch Shell Plc have a median target of 76.12. with a high estimate of 87.00 and a low estimate of 67.88. the median estimate represents a +7.97% increase from the last price of 70.50.