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The $70 billion acquisition of BG Group plc (LON: BG) by Royal Dutch Shell plc (ADR) (NYSE: RDSA) will result in a merged company with market value double that of BP plc (ADR) (NYSE: BP) and bigger than Chevron Corporation (NYSE: CVX).
According to Bloomberg News, this deal counters the prevailing view of energy analysts, who have largely predicted minimal merger activity within the industry for the next two years.
However, Dr. Kent Moors, Money Morning's Global Energy Strategist, was not surprised. He anticipates this to be both a catalyst and a sign of things to come.
"The pace of M&A will be intensifying throughout the year," he says, "fueled primarily by the heavy debt load held by many companies and the fact that crude is unlikely to rise in the short-term, so companies need other options to meet the debt servicing requirements. This environment will be providing some remarkable profits for investors."
The importance of this particular deal, however, should not be overlooked. "The Shell-BG [transaction] will be a huge deal, dwarfing anything else out there. This is also the first clear mega-merger option crossing the oil-gas division. We will see more of these as the new energy balance among a widening number of energy sources kicks in," he added.
Kent will be following this story and the flurry of similar activity he expects in his Oil & Energy Investor newsletter. To keep up with Kent's twice-weekly breaking views at no cost, click here.