New Shell, BG megamerger largest in 20 years

Royal Dutch Shell has announced their intention to purchase BG Group for $70 billion.

The deal will make Royal Dutch Shell the world’s largest independent producer of liquid natural gas.

If the deal is approved by shareholders, it will be the first major megamerger since oil prices began their long slide downward last July. The same slide that has seen a barrel of Bent crude slip from $140 to under $60. According to Dealogic, if the deal is approved, it will be among the largest oil and gas deals in the past two decades.

Shell CEO, Ben van Beurden, said that the purchase of BG’s assets would put Shell at the forefront of large international competition, allowing them to land the pole position to dominate the global liquid gas (LNG) market.

Shell believes that by applying its capabilities to BG’s assets, the combined company group will have two strategic growth businesses: deep water and integrated gas. By 2020, each could potentially generate between $15 and $20 billion of cash flow per year.

BG has valuable offshore assets at Brazil and East Africa and onshore assets in Australia.

Van Beruden said that BG was on the top of their list of possible purchases. He also says that, “LNG is a very important component of this. The whole idea is that we turn the company on the back of this deal into a much more focused company, very, very strong in gas and very, very strong in deep water.”

The deal was first presented in mid-March during a meeting between van Beruden and BG chairman, Andrew Gould. The meeting took place about five weeks after Helge Lund took over as BG’s new CEO.

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