By Sarah Kent
LONDON-- Royal Dutch Shell PLC's $70 billion offer for Britain's
BG Group PLC may be the starting gun for a wave of oil deals that
industry observers have been predicting since crude prices started
to slump in June, analysts said.
"This could mark the beginning of a M&A rave, much like the
one we saw in the late 1990s," Augustin Eden, research analyst at
Accendo Markets, said in a note.
BG, with a market cap of about $46 billion, is likely the
largest of the potential prey--small, midsize oil-and-gas companies
that have been punished by oil prices that have collapsed in half
over the past nine months, analysts said.
The world's biggest oil companies have fared somewhat better and
will be looking at companies with attractive assets and fallen
share prices, analysts said. BG's share price fell more than 20% in
the past year before Shell's bid, but others dropped farther: Irish
explorer Tullow Oil PLC has slumped around 60% and Premier Oil is
down 50%.
Over the same period, the so-called super majors such as Shell
have shed only 10% over the same period, thanks to their strong
balance sheets and diversified portfolios that include large
refining and trading arms.
Tullow and Premier declined to comment.
Until now there have only been small flurries of activity such
as the $8.3 billion acquisition of Talisman Energy by Spain's
Repsol SA announced in December and the planned $34.6 billion tie
up of oil services companies Halliburton Co. and Baker Hughes
Inc.
Shell's acquisition of BG would be the largest in the sector
since Exxon Corp's tie up with Mobil Corp in 1998, according to
data provided by Dealogic. The $82 billion megamerger created the
world's biggest publicly traded energy company and came amid a
flurry of consolidation among the world's giant integrated oil
companies from which Shell remained aloof.
It remains to be seen if Shell's acquisition of BG signals the
start of another round of blockbuster oil sector tie ups. Oil and
gas companies on the Stoxx Europe 600 index jumped following the
news, but Shell's shares are down, suggesting investors have yet to
be convinced of the value of a new round of super deals.
The last big round of oil-and-gas mergers changed the face of
the oil industry in the late 1990s and early 2000s, after another
oil-price collapse. Exxon bought Mobil, BP merged with Amoco and
ARCO and Chevron tied up with Texaco.
Write to Sarah Kent at sarah.kent@wsj.com
Access Investor Kit for Tullow Oil Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB0001500809
Access Investor Kit for BG Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB0008762899
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B03MLX29
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B03MM408
Access Investor Kit for Premier Oil Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00B43G0577
Access Investor Kit for BG Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0554342032
Access Investor Kit for Baker Hughes, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0572241075
Access Investor Kit for Exxon Mobil Corporation
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US30231G1022
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7802591070
Access Investor Kit for Royal Dutch Shell PLC
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7802592060
Access Investor Kit for Tullow Oil Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US8994152028
Subscribe to WSJ: http://online.wsj.com?mod=djnwires