Royal Dutch Shell PLC (RDS-B, RDSB.L, RDSA.L, RDS-A) said, by capping its capital spending in the period to 2020, investing in compelling projects, driving down costs and selling non-core positions, it can reshape Shell into a more focussed and more resilient company, with better returns and growing free cash flow per share. The Group said its capital investment will be in the range of $25-$30 billion each year to 2020. New project start-ups since end-2014 should contribute some $10 billion of annual cash flow by 2018. Asset sales, as planned, are expected to be $30 billion for 2016-18; the Group expects to make significant progress on the first $6-8 billion of this programme in 2016.
The Group said the integration of BG is gathering pace, and now expects to deliver more synergies, and at a faster rate. Shell announced an increase in expected deal-related synergies, from the $3.5 billion set out in the prospectus, to $4.5 billion on a pre-tax basis in 2018, an increase of some 30%. The Group expects to achieve and exceed the $3.5 billion synergies prospectus commitment earlier than expected, in 2017, when synergies should be $4 billion.
The Group said its free cash flow is being reduced due to low oil prices, and this could continue for some time. As a result of its portfolio development and investment, the Group expects to see an improvement in returns in the next few years, debt reduced, and significant growth in free cash flow, across a range of oil prices.
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