A Review of the Nigerian Energy Industry

Shell ‘to cut capex further’

21 July 2015, News Wires – Shell is reportedly planning to cut its capital expenditure for the year “by several billion” dollars, as the supermajor gets ready to release its interim report at the end of the month.

Shell logoCapital expenditure is expected to be revised “from the $33 billion announced at the end of April, reflecting project deferrals,” the Financial Times reported.

However, the company expects billions of dollars more in savings from its proposed $70 billion takeover of BG Group than previously disclosed, the newspaper said.

The boards of Shell and BG in April reached an agreement on the terms of the cash and share offer made by Shell – one of the biggest deals in the energy sector.

The paper said that Shell also told investors that the deal works with crude oil at $70 per barrel, citing much greater synergies which will likely exceed several billions.

Shell told investors that “value synergies” are likely to be “a multiple” of $1 billion in annual projected savings from merging head offices and other cost-cutting, the FT said.

The company is due to release its interim report on 30 July.

Last year, Shell chopped its capex from $46 billion in 2013 to around $37 billion for 2014, as it was seeking to “moderate (its) growth ambitions” in order to free up cash flow.

Meanwhile, in the first quarter of the year, the company posted steady profits of $4.54 billion, despite a sharp drop in quarterly revenue, which was offset by a reduction in purchase costs.

– Upstream

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