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Shell’s megamerger deal is no reason to panic

History has not judged megamergers kindly. Of the 10 biggest, five took place shortly before the bursting of the dotcom bubble, including Vodafone ’s notorious acquisition of Mannesmann. Another three were in the late stages of the pre-Lehman boom, notably the purchase of ABN Amro by a Royal Bank of Scotland -led consortium — perhaps the dumbest deal of all time. Shell ’s £55bn deal for BG Group on Wednesday ranks as the ninth-biggest in that list, according to Dealogic. So, should shareholders be concerned that the return of the titanic takeover means equities are toppy? Start with the past. It is no coincidence that the really big deals happen when the market is frothy. The logic is the same as that behind the world’s tallest towers : investors and lenders are willing to countenance such financial nonsense as the Burj Khalifa, or London’s Shard, or AOL – Time […]

Posted On : Published By : Tom Whipple
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Shell offers 50 percent premium to buy BG for $70 billion

(Reuters) – Royal Dutch Shell ( RDSa.L ) agreed to buy smaller rival BG Group ( BG.L ) for $70 billion in the first oil super-merger in more than a decade to close the gap with the world’s largest oil firm U.S. ExxonMobil ( XOM.N ). In a joint statement, the two firms said Shell would pay a mix of cash and shares that would value each BG share at around 1,350 pence ($20). It said this represented a premium of around 52 percent to the 90-day trading average. Britain’s BG had a market capitalisation of $46 billion as of Tuesday close, Shell was worth $202 billion while Exxon, the world’s largest oil company by market value, was worth $360 billion. "We have two very strong portfolios combining globally in deep water and integrated gas," Shell’s CEO Ben van Beurden told a news conference. The deal would give Anglo-Dutch […]

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Royal Dutch Shell to Cut 250 North Sea Jobs

Shell said it would cut 250 jobs in the U.K. North Sea. ENLARGE Illustration: Bloomberg LONDON— Royal Dutch Shell PLC said Thursday that it would eliminate at least 250 jobs in its U.K North Sea operations this year, the latest workforce cut for big energy companies trying to reduce spending as crude trades for about half its 2014 peak. The job cuts come on top of the 250 positions Shell eliminated last summer from its U.K. operations and represent another blow to a North Sea oil industry that has seen its often high-cost projects upended by an oil-price collapse. Shell, which has about 94,000 employees world-wide, had been trying to cut costs even before the oil price began falling, after being criticized by investors for years of heavy spending on big projects. The company said the cuts “are part of a range of initiatives Shell has been pursuing to […]

Posted On : Published By : Tom Whipple
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British oil and gas production declines

British government data show oil and gas production in slow decline, though growth in renewable energy is setting records. File Photo by UPI/A.J. Sisco. Preliminary data from the British Department of Energy and Climate Change show total domestic production of oil in the three months ending in January dropped off 3.6 percent while gas production declined by 1.1 percent compared with the same period last year. Total 2014 production of petroleum was down 2.3 percent "as a result of long-term decline and maintenance activity," though natural gas production was up slightly by 0.3 percent "The overall rate of decline in 2014 was the lowest for 12 years at 1.5 percent compared with the average decline of 7.9 per cent over the previous 10 years," the department said. A February report from industry body Oil & Gas U.K. found a bright spot in an otherwise "bleak" year for North Sea […]

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Total moves ahead with North Sea development

Total cleared for development of two reserve fields west of the Shetland islands. Image courtesy: Total French energy company Total said Wednesday its plans for North Sea oil and gas development were backed by a British government expecting sector revitalization. The company said it could confirm the British Department of Energy and Climate Change approved field development plans for the Edradour oil and Glenlivet gas projects west of the Shetland Islands. "The approval of the field development plans by the U.K. government allows Total and its partner DONG [Denmark’s largest energy company] to continue to develop the project according to the concepts outlined in 2014," Total said in a statement. "The project is expected to add reserves of more than 65 million barrels of oil equivalent." A budget plan outlined last week in London is aimed at boosting exploration for new oil and gas reserves in British territorial waters. […]

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Oligarch’s oil deal caught in sanctions crossfire

North Sea oil rig or gas platform As first days at work go, Monday was eventful even by the standards of someone as experienced as Lord Browne. The former BP head took over as executive chairman of L1 Energy, a new $10bn oil and gas investment fund backed by Russian billionaire Mikhail Fridman, to find an unfolding row between his oligarch boss and UK energy secretary Ed Davey at the top of his in-tray. The peer, whose appointment completes a remarkable rapprochement with Mr Fridman, a one-time foe, will use his decades of energy industry expertise and extensive contacts book to lead a hunt for partnership deals and acquisitions. The assets acquired by Mr Fridman’s LetterOne group in a €5bn purchase completed on Monday of RWE Dea, the oil and gas arm of Germany’s RWE , are meant to form the cornerstone of an international energy business. There will […]

Posted On : Published By : Tom Whipple
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Oligarch’s oil deal caught in sanctions crossfire

North Sea oil rig or gas platform As first days at work go, Monday was eventful even by the standards of someone as experienced as Lord Browne. The former BP head took over as executive chairman of L1 Energy, a new $10bn oil and gas investment fund backed by Russian billionaire Mikhail Fridman, to find an unfolding row between his oligarch boss and UK energy secretary Ed Davey at the top of his in-tray. The peer, whose appointment completes a remarkable rapprochement with Mr Fridman, a one-time foe, will use his decades of energy industry expertise and extensive contacts book to lead a hunt for partnership deals and acquisitions. The assets acquired by Mr Fridman’s LetterOne group in a €5bn purchase completed on Monday of RWE Dea, the oil and gas arm of Germany’s RWE , are meant to form the cornerstone of an international energy business. There will […]

Posted On : Published By : Tom Whipple
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Green energy auction sets stage for cheaper solar and wind power

Close to 30 UK green energy schemes have been awarded a subsidy pot worth nearly £4bn in a government auction that has set the stage for a big fall in solar electricity prices and much cheaper wind power. Two small winning solar panel projects have said they can produce electricity for nearly 60 per cent less than the maximum price the government had agreed to pay for that type of electricity and almost the same as current wholesale power prices. More On this topic IN UK Politics & Policy Prices for two large offshore wind farms off the coast of East Anglia and the Scottish Borders have come in as much as 18 per cent cheaper, though each scheme is still likely to receive nearly double the prevailing wholesale price. The auction, which is likely to set new ground rules for the way renewable energy is funded across Europe, […]

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Wrench thrown in British shale gas gears

British shale pioneer Cuadrilla Resources denied permit for shale well operations, but says no fracking involved. Photo courtesy: Cuadrilla Resources LONDON, Feb. 26 (UPI) — British shale pioneer Cuadrilla Resources said it was "perplexed" by a regional council’s decision to deny a planning application for pioneer well developments. The company said it was denied a planning application to conduct seismic operations to get a better understanding of the resource potential at its Grange Hill site in Lancashire County, home to substantial potential reserves of shale natural gas. "We are perplexed and disappointed by the decision," the company said in a statement. There was no statement on the decision from Lancashire County itself on the permit application. Cuadrilla said the well operations did not involve any actual drilling or hydraulic fracturing operations. It received federal permits to move forward in Lancashire from the British Environment Agency earlier this month. Donna […]

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U.K. North Sea Oil’s 1,500 Job Cuts This Year Is Tip of Iceberg

Total SA’s Elgin platform is seen in the North Sea, U.K. Companies looking to cut back include Total, which said Feb. 12 it will reduce investment in mature North Sea fields. Source: Total E&P UK via Bloomberg (Bloomberg) — The world’s biggest oil and gas producers, already cutting hundreds of jobs a week from the U.K.’s North Sea, are just warming up. BP Plc, Royal Dutch Shell Plc and Total SA are among those reducing staff, curbing investment or closing operations as oil prices that have fallen by half since June add to troubles from rising costs and aging resources. About 1,500 jobs have been lost in offshore oil and gas this year, according to Unite, Britain’s largest labor union. Ian Wood, author of a state-commissioned report into the needs of the offshore fossil-fuel business, warned that about 15,000 positions relying on the industry could disappear in months. “The […]

Posted On : Published By : Tom Whipple