Shell updates on combination with BG Group

Royal Dutch Shell is progressing with its recommended combination with BG Group, which Shell announced in April. Shell remains on track for completion in early 2016, as planned.

The company is making “good progress” with the regulatory approvals process, including approvals received from Brazil's Conselho Administrativo de Defesa Econômica (Council for Economic Defense), South Korea's Fair Trade Commission, and the US Federal Trade Commission. Preconditional filings have been submitted, covering Australia, China, and the EU, and Shell says that it is progressing well in other jurisdictions.

A joint team has been established with BG to plan for the integration of the two companies once the transaction has closed, and to retain the top talent from both companies.

Synergies from the transaction should be at least $2.5 billion per year from 2018, subject to the bases of belief, principal assumptions, and sources of information set out in Appendix 5 to the announcement of the recommended combination.  

By combining Shell's current complementary positions with BG's liquefied natural gas (LNG) and deepwater assets, Shell can add value – beyond the announced synergies – by applying its technology and know-how at greater scale, at a lower cost, concentrating on areas of existing competitive advantage, and through better optimization of the combined portfolio.

Pro-forma combined capital investment for Shell and BG in 2016 is expected to be around $35 billion in the current environment. Shell expects $30 billion of asset sales between 2016 and 2018, as the combined portfolios are restructured.

The free cash flow expansion expected from BG's Australia and Brazil growth is a natural fit with Shell's 2017+ free cash flow growth potential. This, in turn, enhances Shell's continued intention to pay a dividend of $1.88/share for 2015 and at least $1.88/share for 2016, and reflects confidence in future financial capacity.

Share buy-back of at least $25 billion expected for 2017–2020, subject to the assumptions set out in the announcement of the recommended combination, supported by the re-shaping of the portfolio that Shell is planning, and enhanced free cash flow from the combination with BG.

 

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