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6 Pages

Shell post-BG: the five keys to value creation


Shell post-BG: the five keys to value creation

Report summary

Shell's takeover of BG completed this week, launching a company to rival ExxonMobil in the Ultramajors league. Although we think that the tie-up has strong industrial logic and was done on fair terms, the macro environment has weakened substantially since the deal was announced in April 2015. Oil prices have halved, the 'lower for longer' scenario is now reality, and sentiment around the long-term is increasingly bearish. Against this background, the market re-rating that Shell was hoping to drive through the acquisition of BG has yet to materialise and the company trades at a 45% discount to our base case valuation.

Making a success of the BG deal will be critical to unwinding this discount. Shell will need to demonstrate – through operational out-performance and delivery on shareholder returns – that the deal was done for the right reasons, at the right price, at the right time. We have identified five areas that will either make-or-break the success of the BG takeover for Shell. 

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  • Shell post-BG: the five keys to value creation PDF - 357.44 KB 6 Pages, 1 Tables, 6 Figures

Description

This Upstream Oil and Gas Insight report highlights the key issues surrounding this topic, and draws out the key implications for those involved.

This report helps participants, suppliers and advisors understand trends, risks and issues within the upstream oil and gas industry. It gives you an expert point of view to support informed decision making.

Wood Mackenzie's 500 dedicated analysts are located in the markets they cover. They produce forward-looking analysis at both country and asset level across the globe, backed by our robust proprietary database of trusted research.

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  • 1. Maximising cost synergies and cutting exploration spend
  • 2. Executing portfolio restructuring
  • 3. Implementing BG's LNG portfolio strategy on a much larger scale
  • 4. Maintaining momentum in Brazil
  • 5. Next steps in business development

In this report there are 7 tables or charts, including:

  • 1. Maximising cost synergies and cutting exploration spend
    • Shell cash flow breakevens
    • Benchmarking: exploration spend intensity
  • 2. Executing portfolio restructuring
    • Upstream divestment options
  • 3. Implementing BG's LNG portfolio strategy on a much larger scale
  • 4. Maintaining momentum in Brazil
    • Shell Brazil production outlook
    • Shell Brazil portfolio sensitivities
  • 5. Next steps in business development
    • Benchmarking: pre-FID spend (2016 to 2030) by resource theme
    • Benchmarking: new project returns
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