Shell and BG Group have reached agreement on the acquisition by Shell for the entire share capital of BG Group, for a total consideration of £47bn (US$70bn). Shell will pay a mix of cash and shares valuing each BG share at around pence 1,350 (premium of 52% to the 90 trading day volume weighted average price on 7 April 2015) and BG shareholders will own about 19% of the combined group. BG will add some 25% to Shell's proved oil and gas reserves (13,081 mboe for Shell and 3,612 mboe for BG on 31 December 2014) and 20% to production. It will provide Shell with competitive new oil and gas projects, in Australia LNG and in Brazil deep water. Synergies are estimated at US$2.5bn per year.
The two companies are complementary. By 2020, the combined group will have two strategic growth businesses – deep water and integrated gas – that could potentially each generate US$15-20bn/year of cash flow from operations. It will have upstream and downstream engines potentially generating a further US$15-20bn/year of cash flow and long term positions potentially adding US$10bn/year.