Royal Dutch Shell offers to buy BG Group for £47 billion

Deal could produce a company with a value of more than £200 billion ($296 billion)

By Nancy Bartels

The big news today on the oil and gas business front is the announcement of a deal between Royal Dutch Shell and oil and gas exploration company BG Group that will form an oil and gas company worth north of £200 billion and earn BG Group stockholders a 50% premium on their shares' value as of yesterday.

Aside from the money to be earned by shareholders, executives and, one assumes, the deal brokers, the implications are a little less clear. Analysts speculate that the deal may be a defensive move on the part of both companies. The precipitous drop in oil prices—50% over the last year—has cost both companies and concerns about the eventual drying up of the North Sea oil supplies has lead to speculation about production cuts and job losses, but the merger is no guaranteed job saver either. Both companies are saying that the deal creates "global synergies" and say that some cuts might have been inevitable without the merger, but are not promising some won't occur anyway.

Analysts are also concerned that Shell is overpaying, suggesting that it will be at least a year after the deal closes before profits will be seen. Early market reports also suggest that Shell stockholders are less than impressed, and Shell stock is down this morning. On the other hand, buying BG gets Shell a share in Brazil's largest deepwater oil fields, consolidates its position in Australia's gas industry and allows more participation in the U.S.'s emergence as a LNG exporter.

Another topic for speculation among analysts is whether or not this is only first of a number of major oil and gas deals we will see over the coming months.

The deal is expected to be completed in 2016.

For more on the deal, see reports from the BBC, Bloomberg and the Cliff Notes version at USA Today.