Remember path to 'hg' executable and pass to external tools and hooks as $HG.
#!/bin/sh
hg init
echo "nothing" > a
hg add a
hg commit -m ancestor -d "1000000 0"
echo "something" > a
hg commit -m branch1 -d "1000000 0"
hg co 0
echo "something else" > a
hg commit -m branch2 -d "1000000 0"
hg merge 1
hg id
cat a
hg status