Shell announced their intention to buy BG group for $70b. BG, formerly British Gas, is not so well known in the USA, but they are one of the largest gas E&P companies in the world, and perhaps the largest European E&P. I think this is the largest E&P deal since Exxon bought XTO during the gas bubble of 2008 for $40 b- a terrible deal for Exxon.
The purchase price of $70b comes out to 7.7x trailing EBITDA. It also comes out to $10.7 per bbl of P1 reserves (their reserves are about 80% gas), and $115,000 per daily flowing barrel. These are all pretty high multiples for a gas company I think (even a non-US gas company), but a big part of the price might be their LNG infrastructure. It is interesting that shell has chosen a company that was not at all distressed, though certainly their share price had fallen over 40% from a high last summer.
The purchase price of $70b comes out to 7.7x trailing EBITDA. It also comes out to $10.7 per bbl of P1 reserves (their reserves are about 80% gas), and $115,000 per daily flowing barrel. These are all pretty high multiples for a gas company I think (even a non-US gas company), but a big part of the price might be their LNG infrastructure. It is interesting that shell has chosen a company that was not at all distressed, though certainly their share price had fallen over 40% from a high last summer.
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