Friday, April 10, 2015

Royal Dutch Shell Takes The First Step, Focus Shifts To Exxon Mobil

This article was first published by Seeking Alpha on April 9, 2015.

By Sarfaraz A. Khan
Historically, a prolonged slump in oil prices has led to an uptake in the M&A activity in the exploration and production space. After the drop in oil prices in the late 1990s, for instance, the industry witnessed two massive deals -- BP (NYSE:BP)'s acquisition of Amoco for $64.3 billion and Exxon's $85.6 billion merger with Mobil that gave birth to Exxon Mobil (NYSE:XOM). Those deals reshaped the oil and gas industry. Following the 50% slump in oil prices in the second half of 2014, the markets were anticipating another round of major deal making activity. The anticipation intensified following Halliburton's (NYSE:HAL) decision to acquire its rival Baker Hughes (NYSE:BHI) for $35 billion in one of the biggest deals in the oilfield services patch. Finally, yesterday, Europe's biggest oil and gas producer took the first step.

Oil major Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) has recently announced the energy deal of the decade. The company is going to purchase its European peer BG Group (OTCQX:BRGYY) for $70 billion in a cash and stock deal which will propel its position as the second biggest Western oil company, ahead of Chevron (NYSE:CVX) and behind only Exxon Mobil.

Shell is paying a hefty premium of 52% for the purchase, which will increase Shell's reserve base by 25% and significantly increase the company's exposure to Brazil's lucrative deep water projects and Australia's LNG sector. Shell has been amassing gas assets in Australia, ever since the company doubled down on natural gas and LNG under its … read full article atSeeking Alpha