Royal Dutch Shell is under pressure from shareholders to cut annual spending below $30 billion after buying BG Group to ensure it can maintain its dividend given the slow oil price recovery.

Shell and other large oil companies slashed budgets, scrapped huge projects and cut tens of thousands of jobs last year in the face of a slump in oil prices from a June 2014 peak of nearly $116 a barrel to below $40.

Shell reduced spending by $8.4 billion to $28.9 billion last year and for the first time in more than three decades global capital spending in the oil and gas industry, known as capex, is set to fall for a second year in a row.

After the completion of the $50 billion BG acquisition, the Anglo-Dutch company set 2016 spending for the combined group at $33 billion and Chief Executive Officer Ben van Beurden said in February it had “options on the table to further reduce our spending should conditions warrant that step”.

At $33 billion, Shell’s capex is the highest among its rivals, exceeding that of U.S. giant Exxon Mobil by about $10 billion. After increasing its debt to nearly 25 percent of its market capitalization after the BG acquisition, investors and analysts say Shell must tighten its belt further.

“Shell needs to cut capex to give the market confidence that the dividend can be sustained, and grown in future,” said Charles Whall, portfolio manager at Investec Asset Management, which owns Shell shares.

Whall expects Shell’s 2016 capex to be cut below $30 billion, and to trend lower.

Steady dividend payouts have been the main attraction for investors in large oil companies over the years and some have tapped the debt market to maintain payouts in the face of last year’s oil price rout.

Shell, for example, has not cut its dividend since the Second World War and has vowed to keep it unchanged following the BG deal.

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Ben Ritchie, senior investment manager at Aberdeen Asset Management, which is a top 10 investor in Shell, said while the company was expected to do more to reduce costs, it should not endanger growth.

“We wouldn’t be surprised to see capex guidance lowered again. However, we want the company to continue to focus on driving long-term growth,” Ritchie said.

“Simply cancelling or deferring economically viable projects to hit a lower capex number doesn’t make sense, especially when the company’s balance sheet remains reasonably robust,” he said.

Following the BG acquisition, Shell’s production and cash flow is set to grow rapidly thanks to new assets in Brazil’s offshore deepwater oil fields and Australian gas, and hence its need to invest in new projects is lower, according to analysts at Bernstein, who rate the company’s shares as “outperform”.

“Shell has yet to give investors enough comfort that all the numbers stack up in 2016 if oil prices don’t move up from current levels,” Bernstein said, anticipating that Shell will revise its 2016 capex to $28 billion at its June 7 investor day.

Spending cuts could include a $1 billion reduction in exploration, about $2 billion from cost savings and some $1.8 billion from project delays or cancellations, they said.

Shell has “the capacity to reduce capex significantly, and should have had sufficient time by June to review the portfolio following the BG acquisition,” Investec’s Whall said.

According to a top 20 investor in Shell who declined to be identified, Shell should aim to reduce spending to $25 billion by 2017: “Anything above $28-$30 billion in 2016 would be a disappointment.”

Shell’s shares have traded at a discount to most rivals over the past year though 25 out of 32 analysts have “buy” or “strong buy” recommendations for Shell, according to Reuters data.

Shell’s 12-month forward share price-to-earnings ratio is below 20 compared with an average of about 27 for its peers, which indicates investors are anticipating higher growth from rivals, according to Reuters data.

Signaling further capex and costs reductions would boost investor confidence in the stock, according to Whall.

“If Shell can deliver clear, decisive capex guidance and instil confidence in the dividend sustainability, there is considerable performance potential given its valuation discount,” he said. “Ben van Beurden can pull this together.”

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