Shell's $70 billion takeover bid for BG may be a harbinger of more deals to come for Australia's resources sector, which has taken a body blow from low prices for oil and other commodities.
"Some companies have quite weakened balance sheets and are looking to sell assets," said Rob Brierley, head of research at Patersons, adding that there's plenty of "bottom of the cycle maneuvering" going on.
Santos in particular may come under pressure to sell assets, he said, noting that the Shell-BG deal could "change the landscape" for Queensland-based liquefied natural gas (LNG) projects. Hit by lower oil prices, Santos wrote off around 1.6 billion Australian dollars (around $1.23 billion) worth of assets in February; S&P cut the company's credit rating late last year.
"The tie-up between Shell and BG could effectively enhance [the BG] projects' economics to the detriment of all other projects," as there's a shortage of long-term gas supply, Brierley said. Many projects, including Santos' Gladstone LNG plant, may have been penciling in supply from Shell's 50 percent-owned Arrow Energy, which may prioritize supply to BG's LNG operations if the acquisition deal is completed.
Royal Dutch Shell announced on Wednesday it had struck a cash-and-stock deal to buy BG Group for 47 billion pounds ($70.2 billion), the third-largest oil-and-gas deal of all time, according to Thomson Reuters data. Globally, oil and gas M&A is at the highest year-to-date level ever, Thomson Reuters data show.