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. Last Updated: 07/27/2016

Shell Takes $4.5Bln Charge In Huge Restructuring Plan

LONDON -- Oil giant Royal Dutch/Shell Group said Monday it would take $4.5 billion in special charges in the fourth quarter of 1998 as part of a radical restructuring that will slash costs and involve selling major parts of its business, including 40 percent of chemicals.

The British-Dutch group plans to cut costs by $2.5 billion a year by 2001 in a bid to improve returns to shareholders.

But Chairman Mark Moody-Stuart told analysts the company had no plans or need to merge, despite the wave of consolidation now sweeping the industry.

Shell trimmed back its expectation of the average return on capital employed that it would achieve by 2001, to 14 percent from 15 percent predicted last year, reflecting current rock-bottom oil prices.

Moody-Stuart said oil prices could well remain around $10 a barrel for the next year, and the group is assuming Brent crude will average just $14 over the next five years.

In that environment, Shell had to refocus.

"We have had to make tough choices, but although we have made some very big cuts, with an $11 billion global spending program we still have plenty of room for growth ... and remain ahead of the competition," he said.

The chairman said the massive special charges and write-downs amounted to a "clearing out of the cupboard," adding that there would be further reductions in Shell's 105,000-strong global work force.

In addition to cutbacks in chemicals, where the number of product businesses will be cut to 13 from 21, Shell is also targeting areas of high-cost oil production and refineries.

Commenting on recent speculation that Shell might join the current round of merger mania, Moody-Stuart said the company had enough on its plate getting its own house in order.