Shell Canada Ltd looks headed for big staffing changes after its Anglo-Dutch parent buys out minority shares, but that may not mean across-the-board layoffs, industry watchers said Friday.
Royal Dutch Shell Plc, one of the world's biggest oil companies, is offering C$40 a share, or C$7.7 billion ($6.9 billion), to buy out the 22 percent of Shell Canada it does not already own.
After the buyout, some Shell Canada departments, such as investor and public relations, will likely be cut or drastically reduced in size. After all, the company, which employs about 5,000 people, will no longer have its own shareholders to report to.
For the rest of the company, which includes profitable oil sands, natural gas, refining and marketing businesses, things are not so easy to predict.
Employees at Shell Canada's Calgary headquarters have expressed trepidation about the Royal Dutch bid, announced on Monday, especially after Shell Canada just hired 700 people last year to meet big expansion plans. It plans to spend billions of dollars developing its vast oil sands deposits. The acquisition would turn Shell Canada into a wholly owned subsidiary, like its US counterpart, Shell Oil Co.
Royal Dutch said it plans to "benefit from a simplified organisation, additional economies of scale and portfolio development in the context of the group's global strategy."
FirstEnergy Capital Corp analyst Martin Molyneaux said it is possible that Canadian and US refining operations could be combined and run as a single unit, possibly from Houston.
Shell runs seven US refineries with a total capacity of about 1.5 million barrels a day, while Shell Canada has three plants pumping up to 300,000 barrels a day.
"I think it's more about downstream than it is about upstream in terms of North American efficiencies and how they tie in all the oil sands production into all of the Royal Dutch refining infrastructure," Molyneaux said. Downstream refers to refineries and gas stations and upstream comprises exploration and production.
Shell Canada has long-term plans to boost oil sands output to more than 500,000 barrels a day from 155,000 currently, starting with a 100,000 barrel a day expansion.
It is likely that oil sands operations would be consolidated in Calgary, analysts said. The parent firm began amassing its own acreage early this year close to Shell Canada's northern Alberta leases.
Some large minority shareholders have deemed the Royal Dutch bid too low given Shell Canada's prospects, and Shell Canada's board has just begun the process of evaluating the bid by forming a special committee of directors and hiring financial advisers.
No decisions have been made on how staffing will be affected, spokeswoman Jan Rowley said. "While that's going on, Canada is running its business," she said.
It seems unlikely that the consolidated company would shift staff from its Alberta Rocky Mountain foothills natural gas exploration segment, said Brent Shervey, managing director of executive search firm Boyden World Corp's Calgary office.
Shell Canada was a pioneer of deep gas drilling in the prolific region and last year made one of its biggest discoveries there, a play called Tay River.
"A lot of the expertise with regards to shallow or deep gas is very field-specific," said Shervey, a one-time Shell Canada employee. "If you've got somebody who knows that field and knows what the structures are, that's very hard to duplicate in some other part of the world."
Comments
Comments are closed.