Shell Says BG Takeover Would Work At Mid $60s Brent Prices
Royal Dutch Shell said it is on track to deliver its $11 billion spending reduction program.
The company also said that a $70 billion takeover of BG Group has enabled Shell to identify a $1 billion increase in pre-tax synergies to $3.5 billion. That amount equates to a 40% increase in synergies. Its takeover plans would work also at mid $60s Brent prices, it said today in a statement.
“BG rejuvenates Shell’s upstream by adding deep water and integrated gas positions that offer attractive returns and cash flow, with growth potential. These are industries where Shell has significant capabilities and technologies. With enhanced positions in both of these themes, Shell can focus on the best positions, and deliver a more structured and predictable investment programme,” Shell’s CEO Ben van Beurden said.
The expected increase should be related to a doubling of expected operating cost savings from $1 billion to $2 billion.
"The Net Asset Value (NAV) oil price breakeven for the recommended combination is currently estimated to be at mid $60s Brent prices, taking account of the transaction structure, current equity market conditions, reduced operating cost forecasts and capital expenditure over time, together with other factors, including synergies," the statement said.
Shell also wrote that a complete assessment of the deal will be possible only at its completion, as it is influenced by equity prices and other market factors.
The Anglo-Dutch company said it wants to pay a $1.88 per share dividend in 2015, and at least the same dividend in 2016.
DIVESTMENTS AND WRITE-OFFS
On Monday, Shell also announced the completion of two divestments, one in France and the other in China.
"In France, the company has completed the sale of its Butagaz LPG business to DCC Energy for €464 million," Shell wrote on its website. "The transaction is a share sale and all Butagaz staff, together with the Butagaz brand, have passed to DCC Energy."
Last week, Shell reported a significant loss in the third-quarter due to write-offs, currency exchange rate effects and financing items.