Commenting on the Shell, BG deal, Tom Ellacott, vice president of corporate analysis for Wood Mackenzie said that this move will secure a leading position in deepwater oil and LNG for the Dutch giant.
The deal values BG’s equity at US$70 billion, plus net debt of US$12 billion and completion is expected in early 2016. According to Wood Mackenzie Shell has made a compelling first move on the M&A market, using its financial strength to take advantage of the slump in oil prices.
The deal combines the two largest IOC LNG players to create an industry giant, Ellacott said. By 2018, the combined entity will control sales of 44 mmtpa of LNG, making it the largest LNG seller in the world. Shell will have flexibility and exposure to virtually every major LNG supply source and market globally, which means significant scope for portfolio optimisation. The move re-energises Shell’s LNG development pipeline, adding a leading US position, entry to East Africa, and new options to expand an already giant presence in Australia and Canada.
Most of the big players, IOCs and NOCs, are weighing up opportunistic acquisitions, but few have the means or appetite for deals anywhere near this scale. Most of the majors are hamstrung by near-term financial stretch, and Asian NOCs are contending with growing political scrutiny of M&A strategy, past and future.
“If you’re looking to the next big deal, ExxonMobil stands out as most likely to pull the trigger. Companies that are unloved by the market but big in strategic resource themes, US tight oil, East Africa LNG, deepwater or frontier exploration, will be the focus of their attention. But don’t expect a wave of late 90s style consolidation,” Wood Mackenzie said.
Shell has said it will sell $30 billion of assets between 2016 and 2018. Wood Mackenzie sees a scope for significant value creation, once the asset market picks up, in trading out of country positions or assets that no longer fit.
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LNG World News Staff; Image: BG Group