LONDON (ShareCast) - (ShareCast News) - Easing concerns over Royal Dutch Shell (B) dividend payments by finding more savings from the £40bn takeover of BG Group helped The Telegraph's Questor column reach a "Hold" view on the oil major.
It also noted cuts to capital spending.

Shell has been the go-to stock for years because of its income-play potential, but Questor noted the problem going forward was that oil finds were increasingly more difficult and expensive to come by.

"Not an immediate threat, but Shell would face a time in the not too distant future when maintaining big dividends would become impossible alongside the need to constantly replace dwindling oil reserves," the column contended.

It pointed to Shell's proverbial aces up the sleeve -- its size and low debt levels -- that meant it could buy a solution, namely BG, the deal completing earlier this year.

"In a stroke it (Shell) replaced the reserves with BG's deep-water oil projects off Brazil, and big gas projects to add to its own Gorgon project off Australia," wrote Questor.

"The beauty is that many of these projects are new and deep-water oil production is expected to double to more than 900,000 barrels per day within the next five years."

But the question lingered, was this the right solution?

Shell's debt spiked after the deal completed -- to 26% from 14% -- bringing with them higher risks to holders of the equity if the profits began to fall.

The dive in crude prices to around $50 a barrel, from $115, has seen that happen.

Shell was now, in Questor-speak, "furiously hacking away at the business" to prove the deal could work.

It planned to save $4.5bn a year by 2018, $1bn more than the previous target of $3.5bn. The majority of those savings, or $3.5bn, should come by end-2017.

The company -- focused on oil, LNG, oil sands, and chemicals made from oil -- also planned to sell $30bn worth of assets within two years, up to $8bn of that targeted for this year, as it moved to quit up to 10 countries.

It would also spend less on new projects. Capex would be limited to $30bn for the next four years, with the flexibility to go below $25bn if the oil price fell. It will spend about $29bn this year, which was less than half the amount spent three years earlier.

"The good news is that all these measures mean the company can sustain 188 cents (129p) dividend payments that offer a prospective yield of 7.6% for the next year or two," explained Questor.

"Investors are not entirely out of the woods though. A prospective yield above 6% points to serious doubts in the market about sustainability."

Nonetheless, the column cautioned that disposals taking longer than expected, the ramp-up in oil and gas production assets being delayed and lower crude prices as potential risks.

"We recommend holding the shares for the dividend income."

Meantime, the Financial Times' Lex column focused on the UK competition sheriff's closer look at Tullett Prebon and ICAP's combined share in oil-product trading in Europe and the Middle East.

A tie-up of the pair would see their global energy and commodity revenues tot up to £323m, with the next largest being BGC Partners at £198m.

Tullett's element in this area has been boosted by deals -- PVM in 2014 and MOAB in 2015 -- as has BGC's following its acquisition of rival GFI last year.

"Market volatility should have helped energy trading but pressure form electronic trading and regulation has meant that only PVM has seen big sales increases," wrote Lex.

"So the increase in market concentration is real," the column added, suggesting a solution would be to spin off ICAP's European oil desk.

"The plan was to combine the traditional brokerage businesses and spin off ICAP's digital units -- fewer oil traders will not affect that much."

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