Cutting headcount might improve the bottom line. Companies often do it in an industry wide race to the bottom and then publicise their employee abuse to appease investors.
But it also often increases risk. Just ask BP with its deadly refinery explosions and its deadly subsea well explosion and on and on, all rooted in cost cutting. The once glorious, verdant Beyond Petroleum is now a fifth rate company. But they are still closing in on the once great Royal Dutch Shell, now scared of their own shadow.
Are there adequate controls in place to monitor and manage risk? Or is risk just pushed down to the lower rank and file so that management have their scapegoats? ("If you don't like it , there are ten other sycophants ready to take your place!")
But Shell is really cutting heads because they are slowly transitioning from a labor intensive and capex heavy business to a business that requires large upfront spend but less cost and less people to run and maintain.
The oil business can be very profitable but also volatile and is so tied to global politics that only Big Oil can survive the risk, cost, and losses. The industry will continue to consolidate as Russia and Saudi Arabia flip each other the bird, like Nero fiddling.
Renewables generate low margins. They require all sorts of incentives to ramp up and hopefully achieve "take off".
Think governments are going to tolerate letting the energy companies they subsidised turn around and charge their restless, angry citizenry high prices to stay warm? Not going to happen.
Think wind farms and solar power will command above average returns, even though anybody can put solar panels on their house and eat into the market share? No.
Renewables will never rise to oil's profit potential.
Layoffs at Shell are part of a longer term strategy to transition to this low margin business, not to boost the stock price. The stock price is kept afloat by stock buybacks funded by asset sales, and working capital and steady dividends funded by low interest debt.
So the layoffs disguised as MOR's are a sign of lower profit expectations.
Why doesn't management take advantage of high oil prices NOW, sell off the dirty assets NOW, and immediately fund green assets? Then Shell could take a real lead over the competition and dominate the renewables space?
Why? Because the shift to a business that will NEVER match oil's profitability would be so noticeable to the stockholders that the board would be voted out immediately.
Transitioning slowly is not so noticeable. But it leaves a big opening for competitors to enter these brave, new markets. And drain Shell's moat. And drive down industry margins.
This whole song and dance about a transitional period is bu-----t. Shell is being duplicitous and their middle of the road approach will leave them squashed, like grape.