Shell (RDS.A) Stock Advances, Defends BG Group Merger
NEW YORK (TheStreet) -- Royal Dutch Shell (RDS.A) stock is increasing by 1.86% to $54.68 in late morning trading on Tuesday, as the company claims its proposed $70 billion takeover of United Kingdom-based BG Group (BG) will be break even so long as oil prices reach the mid-$60s.
Europe's largest oil company had previously forecast the deal to break even with oil prices in the low $70s, the Wall Street Journal reports.
Shell now expects to save a further $1 billion in operating costs to bring total synergies to $3.5 billion, Bloombergreports.
Although Brent crude's outlook for 2018 declined by a range between $10 per barrel and $15 per barrel since the deal was announced in April, the company nonetheless expects improved cash flow from operations, earnings per share and return on capital, according to the Journal.
By 2018, the acquisition should achieve a $2 billion reduction in operation costs, a $1.5 billion reduction in exploration spending and a 40% rise from the prior savings estimate, the Journal adds.
The deal is expected to close in early 2016.
Additionally, on Thursday Shell reported a quarterly loss on a current cost-of-supplies basis of $6.1 billion, down from a profit of $5.3 billion in the 2014 third quarter.
Separately, TheStreet Ratings team rates ROYAL DUTCH SHELL PLC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate ROYAL DUTCH SHELL PLC (RDS.A) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself.
You can view the full analysis from the report here: RDS.A
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