Oil major Shell has told investors its purchase of BG Group will work even if the oil price stays at an average of $50 a barrel for the next two years.
According to reports, the lowest estimate yet for the oil price has been made in a bid to retain shareholder support for the $51billion deal amid plunging crude markets.
The company is confident investors will back the deal later this month, despite the oil price hitting a 12-year low yesterday at $32 a barrel.
The merger was announced by Shell in April last year when oil was trading at around $55 a barrel.
Shell had previously estimated the combined group would be profitable with oil prices around the $70 a barrel mark.
Then, last month the company said it work in the low $60s.
Finance chief Simon Henry told analysts earlier this week that stress tests had been conducted which showed the companies could withstand oil at $50 a barrel over the next two years.
Shell plans to reduce its capital spending by $35billion this year as it delays share buybacks and extends scrip dividends.
Chief executive Ben Van Beurden is expected to meet other leading investors in London today where he and his finance chief will hold phone briefings with US investors next week, according to
company sources.
The investors are being asked how they plan to vote on the deal. Several so far have confirmed their support, but most have refused to disclose their plans, according to the sources.
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