Shell's £34bn takeover of BG Group 'the start of a new chapter'


Royal Dutch Shell has insisted its 49 billion US dollar (£34 billion) takeover of BG Group heralds the start of a "new chapter" as it saw annual profits crash by 80%.

The blue chip giant saw full-year earnings tumble to 3.8 billion US dollars (£2.6 billion) in 2015 from 19 billion US dollars (£13 billion) in 2014 after it was hammered by the recent collapse in oil prices.

On an underlying basis, full-year earnings fell 53% to 10.7 billion US dollars (£7.3 billion).

Shell, which had braced the City for a sharp fall in figures last month, said it had been slashing costs and leading an overhaul to offset the oil price rout, but added it was ready to take further action if needed.

Chief executive Ben van Beurden said: "The completion of the BG transaction, which we are expecting in a matter of weeks, marks the start of a new chapter in Shell, rejuvenating the company and improving shareholder returns."

The group stripped out 4 billion US dollars (£2.7 billion) from the business - around 10% - in 2015 and plans to cut a further 3 billion dollars (£2.1 billion) this year.

It has also previously confirmed more than 10,000 jobs will be axed as part of the BG tie-up and it is planning to offload 30 billion dollars (£20.6 billion) of assets.

Mr van Beurden said: "Shell will take further impactful decisions to manage through the oil price downturn, should conditions warrant that."

The results come less than two weeks before Shell is due to complete its mammoth takeover of BG on February 15 after the deal was given the green light by shareholders last week.

Shell's figures also follow those of rival BP, which two days ago reported its largest annual loss for at least 20 years and revealed another 3,000 job losses.

The oil sector has been battered by the cost of crude, which slumped below 28 US dollars a barrel at one stage last month and has collapsed by more than 70% since a peak of around 115 US dollars a barrel in the summer of 2014.

Shell said it was "making substantial changes in the company" in response to the oil price declines, although the industry is hoping for a rebound later this year.

BP boss Bob Dudley has said he believes oil prices will rise to between 50 and 60 US dollars a barrel by the end of the year as production is cut and demand grows from China and the US.

Shell's full-year profit drop comes after a tough fourth quarter, with earnings down 56% to 1.8 billion US dollars, or a 44% fall on an underlying basis.

But the group offered some welcome cheer to investors as it confirmed it was set to maintain its dividend payout at 0.47 US dollars a share in the first quarter of 2016 - unchanged from the level paid out in previous quarters.

It said last month dividends would total 1.88 US dollars (£1.33) a share for last year and are expected to be at least the same for the year ahead.

Shares rose around 3%, with Michael Hewson, chief market analyst at CMC Markets, saying the results "didn't offer up too many surprises" after last month's "heads up".

But he added: "The bigger problem comes if oil prices remain at their current levels for a significant period of time, which could prompt some concern later on into 2016, particularly if margins continue to shrink."

Shell's deal with BG was waved through last week by investors of both companies despite fears over the rationale for the deal following the recent hefty falls in oil prices.

Shell has priced its BG acquisition based on oil prices rising sharply from their current low levels - predicting a bounce-back of more than 35% this year and further rises ahead, to between 60 US dollars to 85 US dollars a barrel over the course of the next three years.