Shell Share Discussion Threads

[whiskeyinthejar] 13/12/2015 23:49

ABN deal was actually very poorly analysed. ABN was a hostile takeover, so (according to FSA investigation) Rbs board just accepted that due diligence would be poor. Lol.

RBS rushed at ABN when they thought Barclays would buy it and become a bigger bank than RBS.

FSA found that their due diligence consisted of just two lever arch files IIRC.

In contrast I think I read Shell have been looking at buying BG for 14 years.

[supermarky] 13/12/2015 23:43

1400 looks juicy for another lot in my back pocket. Sentiment is very negative at the moment. You'd have to be crazy to buy shell lol.

[diku] 13/12/2015 21:55

But then RBS's in house analysts also had a better handle on the market when buying ABN...or is it all about ones inflated ego?...

[ianood] 13/12/2015 16:22

Personally I believe that Shell's in house analysts have a better handle on the market and future pricing than most including the IEA. For that reason I am minded to follow Ben van Beurden's inklings.

[careful] 13/12/2015 14:45

we must keep our heads.
The latest prediction from the International Energy Agency is for World demand to be a record 96m barrels/day for 2016.
That is 35bn barrels / year.

[84stewart] 13/12/2015 14:18

All
2 things to take in consideration (A)where was BG. share price pre bid,to where it is basically now (B) if shell try to renegotiate deal BG.imho will not go for it as/when oil prices rise a new bidder may come along and bid and £12-14 won't be far away and it will cost shell £700mln to walk away 20p p/share for BG. share holders if BG. gives it as a special divi and shell will have lost a good asset. imo

[whiskeyinthejar] 12/12/2015 18:13

Obviously it's not just about isolated BG numbers it's about synergies.

BG has great assets but has struggled to make the most of them. It's spent $20billion getting it's gas going in Australia. Shell believes they can make use of those facilities in Oz for current Shell assets and bring scale and experience to projects in Oz and for similar in various other countries . Either you believe this will work or not.

US Secretary of State Kerry is going to meet with Putin on Syria, Ukraine next week. There's a plan for opposition groups to talk to Assad and normalised relationship between Russia and USA:




If you believe poo crash was designed to curb Russian aggression and ability to retaliate against sanctions this is important. Russia can't afford to threaten gas cuts to Europe this winter with the fall in poo so crisis has been averted. I think poo fall was planned anyways.

Remember the scare Europe got with realisation that Russia is prepared to use threat of cutting gas supply as a political weapon. The Baltic nations until then got all their gas from Russia and has no connections to the European pipeline system. Poland imports 70% of energy from Russia.

So we got the fall in crude, new LNG projects to wean EU off Russian gas are being built and Gazprom is being investigated by EU and will be forced to open up its gas monopoly.

Yesterday Poland announced first LNG Cargo to its new LNG terminal



Hopefully BG can make some money selling LNG to EU and as relationships with Russia have calmed down hopefully politicians are ready to let poo rise back up to stabilise long term health of oil industry.

[careful] 12/12/2015 16:26

Looking at the actual consumption of commodities such as oil and copper you realise how huge world demand is.
93m barrels/day oil is close to record oil consumption levels, although supply exceeds that by a modest 1-2%.This leads to an above average stored surplus of about 4 weeks supply in America.

it is all down to speculative short positions.
Through ETF's and CFD's i am able to dump oil or copper onto the world market without ever seeing any.
It is just crazy, but no doubt suits the political and financial goals of big players in the USA.Short oil positions are at a record level.

If supply reduced by about 2% and demand increased by a modest 1% you would see a dramatic spike in prices, magnified by the closing of those short positions.
This has happened before.

[apad] 12/12/2015 16:08

Yes, imp.
It is clear that if the deal was being proposed today they wouldn't pay anything like this amount.
I'm betting that they won't back out, but it may well be a close run thing.
For years the rule of thumb was sell RDSB at £21 and buy back at £18 but we haven't seen anything like this before, not even in the 70s as the shale industry now means there are two equilibrium players not one. The shale holes can be switched on and off easily, so when Saudi closes the valves the shale players will start up again.
I remember visiting BP research in the 70s and being told that the oil was running out!
apad

[imperial3] 12/12/2015 15:49

The resulting dilution after this deal does not do us any favours.

[apad] 12/12/2015 15:36

I think you are being a bit harsh folks. He is a major fund manager who speaks for millions of shares, so might be worth listening too.

My own opinion is that the ego of the CEO will carry the day. I didn't realise that there had been previous attempts to do a deal.

I sold my RDSB at £22 a year ago and never thought we would see this price. I took several arbitrage holdings in BG out as a way back into RDSB on Friday. I believe there will be significant medium term benefits to the current cost cutting, especially exiting the ridiculous Artic adventure. I also think the current austerity will aid the filleting of BG, post takeover.

All this will come to naught if RDSB does decide to play hardball and renegotiate the deal. I don't see what BG could do, other than agree. I'm not sure what the takeover rules are and the penalty for pulling out is not huge.

Still, one has to back one's instincts.

apad

[whiskeyinthejar] 12/12/2015 15:15

The article rather twists the facts.

The quote he uses to say the deal only offers portfolio change is taken out of context and was made by the CFO not CEO.

If you read what CFO says in full he's actually very bullish on deal:





"The combination with BG would accelerate our financial growth strategy, particularly in deepwater and liquefied natural gas, both of these already growth priorities for Shell , and areas where the Company is one of the industry leaders today.

We have assessed this transaction on range of parameters, including the intrinsic value. Now this is a transaction which delivers value for both sets of shareholders, across a range of oil prices. The transaction would be accretive to earnings per share and cash flow per share in a relatively short time scale. It would have a strong complementary fit in the number of countries, and this plus the efficiencies that would come from joining the two companies together, should leave the substantial value creation for shareholders over time.

All of this should be also be a springboard for a higher rate of portfolio change at Shell , with an increase in asset sales, a reduction in the combined capital investment, and a reduction in the number of longer-term portfolio themes."

[imperial3] 12/12/2015 15:12

Will Shell now renegotiate the deal with BG?

[careful] 12/12/2015 14:30

what an ignorant windbag.
to compare the BG.deal with RBS taking over ABN Amro is ridiculous.
ABN Amro had a balance sheet stuffed with toxic MBS products and was technically bust.

no mention of the huge synergies and savings generated by this BG. deal.
This is a long term investment.
Time will tell.
could do with an increase in gas/oil prices right now.
It will happen sooner than we imagine.

[apad] 12/12/2015 13:48

I was wondering whether there will be institutional pressure to change the terms.
Here is one informed opinion.
Investors watching the takeover boom and wondering whether it is the start or the end of a period of high investment returns may want to have a look atShell’s proposed takeover of BG.

Megadeals often tell us that the buyer is far more challenged than we know or he admits. Companies with good, reliable prospects almost never take such risks. Prospects for a dividend may play a large role in this deal.

Shell is buying BG Group for around $70bn

When looking at the proposed purchase of BG, I note a striking similarity with RBS’s purchase of ABN Amro (ABN) in 2007.

RBS bought ABN just as the global financial crisis was taking hold, forcing firms like Northern Rock to seek government help, and amid a growing realisation that the world would never quite be the same again.

Shell announced its bid for BG in April 2015, after oil prices had halved in the second half of 2014.

Shell’s tendency to grow its capital employed is remarkable, doubling it between 2000-15
When Shell made its move, oil and mining companies were competing to cut costs and capital expenditures. Shell almost alone went looking for ways to increase substantially the capital invested in its business.

This is not surprising. Shell’s tendency to grow its capital employed is remarkable, doubling it between 2000-15.

The BG deal would give it another huge fillip, increasing the total from $220bn (£150bn) to around $300bn. At current prices the return would be just over 4pc.

Shell’s record of poor returns on an ever-rising capital base makes the BG deal in our view even less appealing.

Ben van Beurden insists Shell can continue paying dividends despite low oil prices

It is a matter of dispute what assumptions Shell was making about oil prices in April.

Some larger investors believe Shell expected a quick recovery to around $90. Over time, vast amounts of money will be seen to have been blown on the assumption of permanently high energy prices.

In a decade in which capital poured into commodities (such as oil), almost no one admits that they were assuming a permanent change in prices. It is often better to watch what the money is actually doing rather than what is being said.

Prices may recover and certainly need to. The value of the deal is now $70bn including BG’s debt. BG is forecast to produce an operating profit of just over $2.8bn in 2015 on consensus forecasts.

For the deal to stack up, profits need to get towards $10bn, three times the expected 2015 outcome. There will doubtless be cost saving benefits. Shellwas initially targeting $2.5bn and the number keeps rising.

Back in April, the CEO said the move provided a springboard for “a higher rate of portfolio…R21; Growth? No. Return? No. Cash generation? No, just “portfolio change”.

This odd notion might suggest internal expectations for the financial dynamics of the deal are not high.

Shell's takeover of BG is the second biggest ever oil and gas deal

It is quite possible to rebalance a portfolio by more aggressive selling, reducing capital employed without the costs and risks of a big deal. Shell’s strategy might be seen as “grow in order to shrink”.

Hugely expensive moves whose main purpose is to rebalance portfolios have a grim history. ICI’s purchase of assets from Unilever was aimed at boosting group-wide margins and was a disaster for them.

The story for Shell is of poor returns on capital. Between 2000-2015 capital employed doubled to $220bn while production declined around 15pc. They are responding to this by a massive further hike in capital employed by acquiring BG.

Still, we should not be alarmed. The company tells us “there is no prima facie need to keep worrying about the value of the deal on a day-to-day basis”.

Telling your shareholders what they should and should not worry about is typical of large companies like Shell; when you are so big that a single shareholder is never going to have a big enough holding to apply pressure, it is easy for a company to adopt a dismissive attitude to its investors.

They are part of the social fabric and immune from hostile takeover.

We might agree not to worry “day-to-day221;, but I believe there is plenty to worry about with the big premium that is being paid.

On April 7 BG was valued at $43bn. The bid the next day was worth $70bn: a premium of $27bn. Since then, a basket of comparable companies has fallen an average of 26pc.

On a similar move, BG’s value would now be $32bn. As the share component of the offer has fallen along with Shell’s share price, the value of the deal is currently $62bn and the notional premium now $30bn.

The spending of companies like Shell is so big, technically complex and long term that non-executives cannot really oversee it properly
This is the value Shell now needs to create. Shell is capitalised at over $200bn. This deal is not big enough to do to Shell what ABN did to RBS, but I think it is still highly material.

The non-executives on the board are in a tricky position. They cannot feasibly disclaim responsibility for the vast sums that are spent. But the spending of companies like Shell is so big, technically complex and long term that non-executives cannot really oversee it properly, in my view.

Unlike RBS and ABN, in this case the taxpayer can rest easy. If it goes wrong, the shareholder takes the hit. The board will move on. The CEO may have already lost shareholder confidence through this deal but will likely be around for a while before he can decently do likewise.

We do not yet have the date for the vote, but in my view shareholders should think hard about this deal and be prepared to show Shell that they care greatly how their money is being spent.

[careful] 12/12/2015 12:59

they already have changed the terms of the BG. whilst doing nothing.
it is much cheaper now.
£3.83 CASH + (0.45 X RDSB) = a much lower price than when Shell were £21.

that is a price reduction of 22%.
(£13.13 at start vs. £10.26 today)

[apad] 12/12/2015 11:46

Has anyone seen speculation about whether the will be pressure to change the terms of the BG bid?
apad

[whiskeyinthejar] 11/12/2015 22:23

The silly prat is bullish on Exxon, but obviously doesn't understand that Shell is also an
integrated oil company,

[topdoc] 11/12/2015 19:23

what a load of rubbish

[moneysage] 11/12/2015 18:19

FJGOONER:Like I said - 1425p - not far now.

[atlantic57] 11/12/2015 17:04

Well all I can say that on a medium term view say 3 years £15 looks good value £12.35 looks even better.

[nigthepig] 11/12/2015 16:53

Good old monty. Keeping us all amused here and on the lloyds board.

[squintyflinty] 11/12/2015 16:49

How long can they maintain the dividend if oil continues it's slide?I can also see lots of oil tiddlers going bust if this scenario continues.