Royal Dutch Shell is buying BG Group for $70 billion, in what Thomson Reuters reports is the third-biggest oil and gas deal of all time. It is also the biggest energy acquisition since Royal Dutch Petroleum purchased Shell Transport & Trading in 2004. That's the deal that created Royal Dutch Shell itself.
So will the news lead to a spur of acquisitive activity in the energy space, and how should investors try to play the coming deals?
Wolfe Research energy analyst Paul Sankey says the only major company that could still be set to make a large deal is ExxonMobil. Potential targets for Exxon include Permian Basin plays Occidental Petroleum, Pioneer Natural Resources, Cimarex Energy and Concho Resources, and Bakken-exposed names Hess and Continental, according to Sankey.
Looking at the options market, Andrew Keene says traders appear to be betting on a deal for natural gas company Energy Transfer Equity.
And Larry McDonald, head of U.S. strategy with Societe Generale's macro group, says that BG Group and Hess were the cheapest large energy stocks, based on the net present value of their oil and gas reserves. That could make Hess the next to go.
But McDonald also has a warning for those tempted to buy energy names just for the potential of a takeout.