Current RDS.B Stock Info

Shell now controls 16% of the world’s LNG market, becomes the largest independent producer of LNG

Royal Dutch Shell (NYSE: RDS.B; www.shell.com) has leap frogged to the second largest publicly traded energy company in the world following the completion of its $53 billion acquisition of BG Group.

top-6 public majors

The largest publicly traded energy companies – Graphic by Oil & Gas 360

The deal was originally announced on April 8, 2015. Under the terms of the agreement, BG shareholders would be entitled to receive $5.53 in cash and 0.4454 shares of Shell Class B stock. More than two-thirds of the agreed price at the time of the announcement would come from Shell’s B shares.

The depletion of commodities prices since the announcement has resulted in a reduced value of Shell’s stock and consequently the deal went from $70 billion in April to $53 billion as of Monday. Originally, Shell offered a 50% premium to the market value of BG shares in April, which has now slipped below 10%.

Rising demand for natural gas and increased need for liquefaction capacity of LNG drove the merger agreement. The combined company now controls 16% of the world’s LNG market, and Shell-BG becomes the largest independent producer of LNG. Shell will gain from BG’s liquefaction expertise and existing infrastructure around the globe with liquefaction terminals from Australia to Trinidad and Tobago, a fleet of tankers to transport the super-chilled fuel and an international team of traders.

Shell, already the largest non-state producer of liquefied natural gas, becomes almost twice the size of its nearest competitor, Exxon Mobil Corp. (ticker: XOM; ExxonMobil.com) following the deal.

Shell BG Graphic

Chart by EnerCom Analytics

Shell’s reserves have decreased progressively in three of the last four years, while BG’s have increased in six of the past seven. Since 2010 Shell’s total proved reserves have fallen by 1152 million barrels while BG has added 718 million.

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