Shell added $1bn (£690m) to its estimate of gains from the takeover of BG Group as it set out a plan to support its dividend in an era of low oil prices.
In a presentation to investors, the Anglo-Dutch company said it expected cost savings from the £35bn takeover of BG to be $4.5bn, up from an earlier estimate of $3.5bn. The deal, completed in February, was the biggest in the energy sector for a decade.
Some investors doubted the wisdom of buying BG as oil prices plunged after the announcement but Shell has argued BG gives it a leading position in deepwater production and liquefied natural gas (LNG), which allows gas to be shipped around the world in tankers.
Ben van Beurden, Shell’s chief executive, said: “The BG deal is an opportunity to accelerate the reshaping of Shell. Integration is gathering pace, and today we expect to deliver more synergies, and at a faster rate.”
He said the pledges Shell made to shareholders when the BG takeover was announced remained intact. They included $30bn of asset sales, less debt and maintaining Shell’s dividend, which is an important income source for many pension fund investors.
Shell, Britain’s biggest company with a market value of £138bn, said that low oil prices were reducing its free cashflow and that this could continue for some time.
The energy sector has been forced to cut costs after the price of Brent crude plunged from $115 a barrel in summer 2014 to less than $30 at the start of this year. Oil has since staged a partial recovery and was $50.57 a barrel on Tuesday morning.
To generate cash, Shell plans to push down capital spending to the low end of its $25-30bn range and cut operating costs by 20% to $40bn by the end of this year. Shell stuck to its $30bn target for asset sales by 2018 and said new projects since the end of 2014 should add $10bn to cashflow by that time.
The company also set out plans to invest in new energy sources such as low carbon biofuels, solar and wind.
Van Beurden said: “By capping our capital spending in the period to 2020, investing in compelling projects, driving down costs and selling non-core positions, we can reshape Shell into a more focussed and more resilient company, with better returns and growing free cashflow per share.”
Shell shares rose 1.3% to £17.34.