BG Group acqusition by Shell

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In times of a downturn, oil and gas market was unstable and a number of companies suffered. Nowadays, oil price is double it was a year ago. Crucial decisions had to be made and some were brutal, especially in upstream where companies such as Schlumberger, Halliburton and Baker Hughes cut jobs and made their employees redundant. Obviously, at that time downstream did not thrive but large fuel margins helped companies survive. Surprisingly, in spite of unpleasant situation one of the supermajors – Royal Dutch Shell decided to bid for BG acquisition.

In April 2016, Royal Dutch Shell announced that BG acquisition had been agreed for 70$ billion. Nearly a year past, in February 2017, the takeover was completed with a final price $52 billion.

When it comes to focus areas, Shell is known for its highly advanced fuels and lubricants produced and sold with substantial margins in downstream. Talking about BG, its operations are mainly exploration and extraction of natural gas and oil as well as the production of liquefied natural gas (LNG). Clearly, such a merger creates an interesting business and what is more, new opportunities in oil and gas industry.

Acquisition of BG seems to be a new strategy and significant chance for development in upstream. The merger made Royal Dutch Shell the world’s largest producer of LNG. The market reacted positively on merger news. Both Shell and BG Group shares increased rapidly. Even though, Shell has deepend its debt the advantages of the acquisition were considered worth acquiring. Surely, it is a big deal and hopefully this happening will enhance competition among other supermajors.

Sources:

fuelfix.com
wikipedia.org

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