Shell seeking to buy BG in first oil super-merger in over a decade

Wed Apr 8, 2015 12:52am EDT
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By Narottam Medhora and Dmitry Zhdannikov

(Reuters) - Royal Dutch Shell (RDSa.L: Quote) is in advanced talks to buy BG Group BG.L in the first oil super-merger in more than a decade, seeking to extend its lead in gas production and close the gap with the world's biggest oil major, U.S. ExxonMobil (XOM.N: Quote).

BG, which has a market value of $46 billion, said in a statement on Tuesday it was in advanced discussions regarding a possible offer by Shell, whose market capitalisation is $202 billion. Exxon is worth $360 billion.

A successful deal would give Shell access to BG's multi-billion dollar projects in Brazil, East Africa, Australia, Kazakhstan and Egypt, including some of the world's most ambitious liquefied natural gas (LNG) projects.

The collapse in global oil prices has sparked much speculation about mergers in the industry and BG has often been cited as a potential target.

An agreement would mark the biggest announced deal globally this year. In terms of oil and gas mega mergers, it would be the world's fourth largest since 1996 when BG's net debt of about $12 billion is included, according to Thomson Reuters data.

The talks come as BG, Britain's third-largest energy company by market value, has been plagued by delayed payments in Egypt, written $6 billion off the value of it oil and gas business and seen an 8 percent decline in annual net earnings. It has also cut capital expenditure by as much as 36 percent this year.

BG said Shell must announce a firm intention to make an offer by May 5 or announce that it does not intend to make an offer. "There can be no certainty that any offer will ultimately be made for BG," it said.

BG shares have tumbled nearly 28 percent since mid-June, when the slump in global oil prices started. That compares with a 17.2 percent decline in the FTSE All Share Oil and Gas Index .FTASX0530 and a 3.3 percent fall for Shell's Amsterdam-listed shares.   Continued...

A Shell logo is seen on a pump at a petrol station in London April 28, 2010.  REUTERS/Toby Melville