The $53B mega deal - creating the world's biggest trader of liquefied natural gas - came into force today after shareholders waved through the tie-up at the end of January despite slumping oil prices.
"We will now be able to shape a simpler, leaner, more competitive company, focusing on our core expertise in deep water and LNG," CEO Ben Van Beurden declared.
Shell (RDS.A, RDS.B) has said it will cut more than 10K jobs from the combined group and sell $30B of assets over the next three years in order to finance the deal, buy back shares and support dividends.
For FY 2015, BG recorded a pre-tax profit of $2.97B, against a loss of $2.3B in 2014; Shell's full-year earnings fell 80% Y/Y to $3.84B.
BG's full-year production rose 16% Y/Y to 704K boe/day, ahead of guidance for 680K-700K boe/day.
Collapsing crude oil prices have affected BG less than some of its peers because the company is one of the few producers increasing output as projects start in Australia and Brazil - a top attraction for Shell, which is eager boost its own reserves, production and cash flow.
At a meeting in London, 99.5% of BG shareholders voted in favor of the merger, a day after 83% of Shell's shareholders approved the deal.
BG CEO Helge Lund, who joined BG just weeks before the merger was announced, will step down; Shell exec Huibert Vigeveno, who headed the integration planning in recent months, will become transitional CEO.
Royal Dutch Shell (RDS.A, RDS.B) faces a crucial test this week when its proposed $45B acquisition of BG Group (OTCQX:BRGYY), the British oil and gas producer, will be put to both companies' shareholders.
Shell investors are expected to vote today, and BG's tomorrow.
Some have been skeptical about Shell going ahead with such a big acquisition at a time of falling oil prices, but big stakeholders like the Norway oil fund support the deal.
Royal Dutch Shell (RDS.A, RDS.B) -5.2% in London trading after saying it expects FY 2015 earnings on a current cost of supplies basis of $10.4B-$10.7B, down more than 50% from $22.6B in 2014, with income attributable to shareholders of $600M-$1B for Q4 2015 and $1.6B-$2B for the full year.
Shell is a mess, WSJ's Helen Thomas writes: Its operating cash flows, at ~$30B, barely cover last year’s investment spending let alone the $12B dividend it has pledged to maintain, debt levels are rising, production is falling by ~6%, and its largest projects are not slated to start up until 2017.
It's not hard to see why Shell wants to acquire BG, Thomas adds, as the smaller company reported 2015 production rose 16%, helped by its liquefied natural gas project in Australia and oilfields in Brazil.
Royal Dutch Shell's (RDS.A, RDS.B) profit fell by as much as 50% in the fourth quarter compared with the same period in 2014, illustrating how the slump in oil prices is wreaking havoc on the energy industry.
Profit adjusted for one-time items and inventory changes is expected to be between $1.6B-$1.9B (from $3.3B), while profit for the year on the same basis is predicted to have fallen between $10.4B-$10.7B (from $22.6B).
Another looming question is whether shareholders will approve Shell's $49B takeover of the BG Group (OTCQX:BRGYY). The oil major expects the deal to conclude in "a matter of weeks."
Thomas notes that Shell needs only 50% of voting shareholders to back the deal; turnout at Shell's annual general meeting tends to be only ~54%, and the figure could approach 45%-50% when considering that perhaps 6% of Shell’s stock has been borrowed by short sellers to balance long arbitrage positions in BG, which could be in the hands of trading desks or other institutions that are less likely to vote.
"Even with a fat spread, the chances of this deal faltering at the final hurdle look slim," Thomas concludes.
Royal Dutch Shell (RDS.A, RDS.B) wins the support of proxy advisory firm ISS for its takeover bid from BG Group (OTCQX:BRGXF, OTCQX:BRGYY), saying the deal has “compelling strategic rationale” and “significant positive economics to be realized within a relatively short time frame.”
Thirty-five of the top 50 shareholders in Shell subscribe to ISS, so a positive recommendation is akin "to a top five shareholder publicly and vocally supporting the transaction,” says Fred Ward at Olivetree Financial.
The spread between the value of BG’s share price and Shell’s offer for each BG share has widened to an unusually high 11%, and a widening spread could mean investors are not confident the deal will be approved; low oil prices and the Chinese market turmoil also may have damaged the deal’s prospects.
Earlier: Shell set to secure investor approval for BG takeover, reports say (Jan. 7)
CFO Simon Henry reportedly is saying Shell will cut capital spending further below the planned $35B for 2016, delay share buybacks and extend scrip dividends, but will keep the size of its dividend unchanged.
BG traded 12.5% below Shell’s bid price as of last Friday, the biggest discount since early September, compared with a 6.4% gap as recently as Dec. 4; BG soared on news of the deal in April, but it has since tumbled more than 20% as oil prices plunged.
If Brent crude sinks to the mid-$20s, the deal may fall through, says Philip Lawlor, a strategist at Smith & Williamson in London.
Energy Transfer Equity (NYSE:ETE), Energy Transfer Partners (NYSE:ETP) and BG Group (OTCQX:BRGXF, OTCQX:BRGYY) say they have received approval from the FERC to site, construct and operate a planned natural gas liquefaction and export facility in Lake Charles, La.
The Lake Charles LNG project would be one of the largest LNG export initiatives in the U.S.; if built to full capacity, it would be capable of exporting as much as 2B cf/day of natural gas per day, or ~15M tons/year of liquefied natural gas.
Energy Transfer will provide pipeline services to the plant, while partner BG will build the facility and handle the gas it liquefies.
The companies expect to make a final investment decision in 2016, but a final go-ahead is far from certain given the glut of LNG export capacity due to come online and low prices eating into margins the projects were expected to capture.
Royal Dutch Shell's (RDS.A, RDS.B) takeover of BG Group (OTCQX:BRGYY) may look less attractive after the slide in oil prices but the fact the same investors own nearly half of both firms means the deal is still likely to go through.
According to Reuters data, investors holding about 43% of Shell's shares also hold 53% of BG.
Shareholders will be voting separately on the deal at meetings expected next month.