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 Callum O'Reilly
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/09042015/bg-group-good-value-for-shell-567/