The Guardian (UK): BG reserves targeted: “The broker reckoned BG could also be a tempting target for Shell…” (ShellNews.net) 15 March 05

Market forces

Neil Hume

Tuesday March 15, 2005

EXTRACT FROM ARTICLE

BG Group outperformed its peers BP and Shell and the wider market yesterday as traders took the view that the company remained a potential takeover target, despite its recent strong run.

BG shares have risen 25% in the past year as the City has come to appreciate its market-leading position in liquefied natural gas. However, that strong performance has taken BG market value to £15bn - a level many believe makes the company virtually bid proof.

With the most of the world's major oil companies struggling to replace their reserves, analysts believe BG's gas projects - nearly all of which have a long reserve life, are increasingly attractive to the bigger players.

According to a research note published by US broker Sanford C Bernstein on Friday, Total, BP and ExxonMobil could all reap significant cost-savings by buying BG.

The broker reckoned BG could also be a tempting target for Shell, which has just signed a $7bn (£3.6bn) deal with Qatar Petroleum to export LNG to the US and Europe.

"Comparing the acquisition cost to the upstream capital expenditure plans of Shell reveals that an acquisition continues to compete with its [Shell's] organic plans at prices up to our target price [470p] if probable reserves are taken into account," it said.

With traders taking these views on board, BG shares closed 4.25p higher at 414p. Some market professionals are wary of chasing BG higher, noting rumours that it might make a big acquisition.

http://www.guardian.co.uk/business/story/0,,1437723,00.html