Royal Dutch Shell announced today that an agreement had been reached with BG Group that will see the company purchase BG Group in a deal that values the business at £47bn.
The cash and shares offer which gives investors a 50% premium on BG Group's share price on 7 April.
So here is the deal. You are an international oil and gas company, operating in a market that is seeing the prices for your hydrocarbon commodities becoming increasingly depressed and priced at levels seen back in 2004. Yet your cost base has risen steeply in the last ten years. Your reaction to these low oil and gas prices is to make redundancies and cut exploration costs. Ideally you want to re-balance your portfolio, get access to lower cost onshore oil and gas production and hopefully ride the storm until the price of oil and gas heads north. But you also want more access to gas, the commodity that is not so aligned to automotive sector demand, where a revolution is underway, vehicles are becoming much more fuel efficient, electric vehicles and hybrids are now becoming commonplace, Cars in general are lighter, more fuel efficient, and so are heavy goods vehicles.
Gas demand is related to power, domestic cooking, Asia needs lots more gas, coal fired power stations are bing replaced by cleaner gas fired power stations, the gas market is more interesting longer term.
What Royal Dutch Shell and BG Group have collectively decided to do is to shape their future together, it is a reaction to the current market conditions that has prompted this deal.
For Royal Dutch Shell's shareholders, they get access BG's diverse global production portfolio which includes some fantastic world-class gas assets particularly in markets that are gearing up to supply Asia and in lower cost operating jurisdictions such as Africa's Qatar i.e. Tanzania
Shell get access to Tanzania's offshore Blocks 1, 3 and 4 and around 15 tcf of total gross gas resource, where BG have a 60% interest. It also gives Shell a massive foothold in Australia's gas market where BG Group is developing a two-train 8.5 mtpa LNG plant supplied by coal seam gas (CSG). The Queensland Curtis LNG (QCLNG) plant is being built on a 270 hectare site on Curtis Island, Gladstone, on the Queensland coast.
BG Group’s business in Australia comprises: Licences in four onshore areas of producing and potential gas supply covering a total of around 33 000 square kilometres.
The project’s total reserves and resources at the end of 2013 were 22 tcf (net BG Group): Surat Basin CSG play: producing gas for the domestic market and will provide production into the LNG plant; Bowen Basin CSG play: exploration and appraisal ongoing; Bowen Basin tight gas sand play: exploration and appraisal ongoing; Cooper Basin tight gas sand and shale gas plays: exploration and appraisal ongoing; A 540 kilometre pipeline network comprising a 200 kilometre gas collection header and a 340 kilometre export pipeline; Major shareholdings in the two-train liquefaction facility, including 100% equity in common facilities such as the LNG storage tanks and jetty; and The 140 megawatt Condamine power station.
The cash and shares offer which gives investors a 50% premium on BG Group's share price on 7 April.
So here is the deal. You are an international oil and gas company, operating in a market that is seeing the prices for your hydrocarbon commodities becoming increasingly depressed and priced at levels seen back in 2004. Yet your cost base has risen steeply in the last ten years. Your reaction to these low oil and gas prices is to make redundancies and cut exploration costs. Ideally you want to re-balance your portfolio, get access to lower cost onshore oil and gas production and hopefully ride the storm until the price of oil and gas heads north. But you also want more access to gas, the commodity that is not so aligned to automotive sector demand, where a revolution is underway, vehicles are becoming much more fuel efficient, electric vehicles and hybrids are now becoming commonplace, Cars in general are lighter, more fuel efficient, and so are heavy goods vehicles.
Gas demand is related to power, domestic cooking, Asia needs lots more gas, coal fired power stations are bing replaced by cleaner gas fired power stations, the gas market is more interesting longer term.
What Royal Dutch Shell and BG Group have collectively decided to do is to shape their future together, it is a reaction to the current market conditions that has prompted this deal.
For Royal Dutch Shell's shareholders, they get access BG's diverse global production portfolio which includes some fantastic world-class gas assets particularly in markets that are gearing up to supply Asia and in lower cost operating jurisdictions such as Africa's Qatar i.e. Tanzania
Shell get access to Tanzania's offshore Blocks 1, 3 and 4 and around 15 tcf of total gross gas resource, where BG have a 60% interest. It also gives Shell a massive foothold in Australia's gas market where BG Group is developing a two-train 8.5 mtpa LNG plant supplied by coal seam gas (CSG). The Queensland Curtis LNG (QCLNG) plant is being built on a 270 hectare site on Curtis Island, Gladstone, on the Queensland coast.
BG Group’s business in Australia comprises: Licences in four onshore areas of producing and potential gas supply covering a total of around 33 000 square kilometres.
The project’s total reserves and resources at the end of 2013 were 22 tcf (net BG Group): Surat Basin CSG play: producing gas for the domestic market and will provide production into the LNG plant; Bowen Basin CSG play: exploration and appraisal ongoing; Bowen Basin tight gas sand play: exploration and appraisal ongoing; Cooper Basin tight gas sand and shale gas plays: exploration and appraisal ongoing; A 540 kilometre pipeline network comprising a 200 kilometre gas collection header and a 340 kilometre export pipeline; Major shareholdings in the two-train liquefaction facility, including 100% equity in common facilities such as the LNG storage tanks and jetty; and The 140 megawatt Condamine power station.
No comments:
Post a Comment