The World’s Se­cond Ul­tra­ma­jor

Alberta Oil - - OBSERVER -

THE PAR­TIC­U­LARS: Royal Dutch Shell share­hold­ers voted 83 per­cent in fa­vor of Shell’s £34-bil­lion (US$49 bil­lion) bid to buy BG Group, and 87 per­cent of BG share­hold­ers fol­lowed suit, with a for­mal com­ple­tion slated for Feb. 15.

Dis­sent­ing share­hold­ers in­cluded Stan­dard Life In­vest­ments, Shell’s 11th-big­gest share­holder. Cit­ing “down­side risks,” in­clud­ing Shell’s oil-price as­sump­tions, it voted against the deal.

Over two-thirds of the takeover is funded by Shell’s B shares. The value of the deal has tracked tank­ing oil prices from US$70 bil­lion in April 2015 to US$50 bil­lion in Jan­uary. Last April, Shell of­fered a 50 per­cent pre­mium to the mar­ket value of BG shares, which soon shrank to below 10 per­cent. THE PAY­OFF: Shell now ri­vals ExxonMo­bil in the ul­tra­ma­jor league, with both ex­pected to pro­duce 4.3 mil­lion bar­rels of oil equiv­a­lent per day in 2020, ac­cord­ing to Wood Macken­zie. ExxonMo­bil will lead in un­con­ven­tion­als and Shell in LNG and deep­wa­ter pro­duc­tion.

The deal will boost Shell’s oil and gas re­serves by 25 per­cent and strengthen its pres­ence in the LNG mar­ket. Shell CEO Ben Van Beur­den says he’s de­lighted with the “con­fi­dence that share­hold­ers have shown in the strate­gic logic” of the deal. This is Shell’s big­gest-ever ac­qui­si­tion, pow­er­ing it past Chevron to be­come the world’s sec­ond­largest non-state oil com­pany.

The takeover will raise Shell’s mar­ket value to nearly US$175 bil­lion, while boost­ing re­serves and pro­duc­tion, en­hanc­ing cash flow and broad­en­ing its abil­ity to pay div­i­dends.

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