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Fair price for BG Group

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LNG Industry,

Rystad Energy believes that Royal Dutch Shell’s US$69.7 billion offer to take over BG Group, which implies a 50% premium to pre-deal stock prices, represents a fair price at US$100/bbl oil prices.

The new enterprise value of BG is now US$70 billion, which is lower than the fundamental valuation in Rystad Energy’s upstream databse UCube, which set a price of US$77 billion for BG Group’s upstream activities (assuming US$105/bbl Brent in 2020 and 10% required return).

Rystad Energy’s valuation indicates that half of the value is driven by Brazil pre-salt. BG Group has been a close partner with Petrobras in this area since it discovered the  Lula field in 2006. The value of the Brazil portfolio is 50% driven by projects not yet sanctioned. Coal seam LNG projects in Australia represent US$20 billion of the valuation.

Edited from press release by

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