Shell Says it Can Make BG Group Takeover Work Despite Weak Oil Prices

Engineering News reported that Royal Dutch Shell (NYSE:RDS.A) attempts to ease investors concerns over its planned $70 million BG Group takeover, by announcing plans to further cut costs to make the deal still work at mid-$60 per barrel oil prices.
As quoted in the market news:

The Anglo-Dutch group, which hopes to complete the deal early next year, said it now expected synergies to increase by $1-billion to $3.5-billion for the combination which will make Shell a leader in liquefied natural gas (LNG) and offshore oil production in Brazil.
Shell, which last week reported a huge third-quarter loss due to $8-billion of write-offs in Alaska and Canada, said it would reduce its costs by $11-billion in 2015 as it tackles a prolonged period of lower oil prices, currently trading below $50/bl.
“Shell is becoming a company that is more focused on its core strengths, a company that is more resilient and competitive at all points in the oil price cycle and that has a more predictable project development pipeline. We’ll grow to simplify,” CEO Ben van Beurden said in a statement ahead of a company strategy day in London.
Investors have been concerned that the benefits from the deal would be at risk as a recovery in oil prices is now expected to take much longer than foreseen in April, when the merger with BG was announced.
Back then, Shell indicated it expected oil prices to recover to $90 /bl by 2020. BG shares currently trade at a discount of more than 10% to the valuation of the cash and shares deal, reflecting investor concerns over its viability and remaining regulatory hurdles. Shell awaits the approval of Australian and Chinese regulators before the deal can be put before shareholders.

Click here to read the full Engineering News report.