Ben van Beurden is incredibly excited. He’s also being bold, visionary and transformational. He’s not quite walking on water yet, but he hopes to be walking on oil, figuratively speaking, as he takes Royal Dutch Shell to the top of the big oil premier league. We are all shareholders in Shell, either directly or indirectly, and when it has swallowed BG Group, it will be responsible for one pound in every nine of total dividends paid by UK companies.

This is uncomfortable, at best. The key to dividends is not this year’s payment, nor even next year’s, but whether the business is capable of sustaining (let alone increasing) the amount of cash it can distribute to the shareholders annually. For an oil company, one of the key metrics of sustainability is whether its reserves are rising or falling. In Shell’s case they are falling, and BG’s Australian gas and Brazilian deepwater oil will reverse that trend.

The logic of buying BG has fuelled fantasy M&A for decades. The operational fit is almost painfully good, in that the duplication of  skilled geologists promises job losses in a market where almost everyone is already cutting back. The price of being bold and visionary will be a loss of diversity of skills in the UK, and the price which Mr van Buerden is prepared to pay for BG leaves him no choice but to hammer down on costs. He’s also trying to offload $30bn of assets into a depressed market. Good luck with that.

Asset sales and cost cuts will not be enough to sustain the dividend after this deal. It requires a rebound in the oil price, since those mouth-watering Brazilian reserves are barely profitable at $50 a barrel. At $90, the boss would look like a true visionary, but in truth Mr van Buerden has little more idea of what will happen than anyone else – BP’s 2014 annual oil bible completely missed the price impact of shale.

Deals which are described in the glowing terms being applied to this one seldom produce the glittering gains anticipated in the incredibly exciting moment of the drama. The Shell share price has lost 10 per cent, or £17bn, this week because its dividend looks rather less sustainable than it did last Saturday.

Lost in the woods

John Prescott was in no doubt. “Absolute bloody rubbish”  was his response to the evidence that the “£60,000 homes” built on his initiative as deputy prime minister were falling apart just seven years after they had been built. The Oxley Woods development in Milton Keynes is architect designed, award-winning and seemingly popular with the residents despite its local nickname of Legoland. There’s just one snag – the snags.

Every new house needs snagging, but the small print of the 2014 annual report from the builders, Taylor Wimpey, reveals provisions of £12.4m last year, much of which is for Oxley Woods’ 122-home development. Cladding panels have fallen off, allowing the weather in, triggering wet and dry rot. Everyone is blaming everyone else, from architects Rogers Stirk Harbour to various contractors. Legal action is looming.

This will be wearily familiar to anyone with a building dispute, but it’s more tragedy than farce. All parties tried to build something interesting and innovative at a price which wasn’t beyond the dreams of half the population. If you wonder why housebuilders prefer to pepper the countryside with little boxes made of ticky-tacky, Oxley Woods provides some of the answer.

Speak up or lose out

The countdown to the election is under way. No,.not that one, but the annual meeting of Alliance Trust, which promises a real beano in Dundee on April 29, as the directors try to repel boarders from Elliott Advisors. Alliance has quite successfully painted them as pirates intent on pillage or worse, even though the trust’s own defences look decidely wobbly. ShareSoc, which champions the sort of individual investors who are Alliance shareholders, describes Elliott’s tactics as “perfectly reasonable”. However, we have yet to hear from the marauders’ nominees for the board, Anthony Brooke, Peter Chambers and Rory Macnamara. The Alliance board doesn’t really deserve to win, but unless we do hear, the trio deserves to lose.

This is my FT column from Saturday

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