Shell – BG deal viable at $50 oil price

Royal Dutch Shell has assured investors its US$70 billion acquisition of BG Group is profitable even if the US$50 per barrel oil price persists for further two years.

Prior to the January 27 meeting when the final decision on the deal will be made Shell believes it will have the backing of its investors, Reuters reports citing sources.

 

Shell’s initial estimations showed the merger would be profitable with a price of around US$70 per barrel but that estimation was reduced further to US$60 per barrel, as Shell revealed further costs cutting options.

 

Shell’s CFO Simon Henry said to make the deal work at US$50 per barrel, the company intends further capital spending cuts bellow the planned US35 billion for 2016. Share buybacks will also be delayed and script dividends extended as investors will be offered discounted shares instead of cash.

Henry is reportedly set to hold talks with U.S. investors while the company’s CEO Ben van Beurden will hold leading investors in London in order to gather information on which way the shareholders could vote.

Some shareholders have already showed support while others declined to reveal their choice, although, it is expected that over 50 percent of the votes will be in favour of the deal.

Archive