BG Group plc (ADR)(OTCMKTS:BRGYY) was a notable move in trade in the overnight session. The stock rallied by close to 3 percent on the back of 9 times the daily average volumes, which is considered to be a bullish sign. The price volume action seen in the overnight session meant that the stock was able to move all its important daily moving averages. The relative strength index for the stock has given a fresh buy signal indicative of the shift of momentum towards the buy side. Traders on the street believe the stock could head to levels of $17 in the near term.
Royal Dutch Shell intended to buy a stake in BG Group plc (ADR)(OTCMKTS:BRGYY) some time ago. However, its recent loss, which is said to be the biggest in the last 16 years has put a question mark on its intentions. Reports claim that this deal may not be a worthy call to take at this time.
Insights of The Matter
According to famous investment strategist Philip Lawlor, the senior management of the company has already put a lot on the stake. Ben Van Beurden, CEO, Shell, is walking a narrow road, where there’s no scope of any mistake, not at this point. Most of the investors of the company think that investing in BG Group at this moment would be a dilutive decision than an accretive one.
All the forecasts about oil prices have gone wrong after the global volatility that hit the world recently. When Shell made public its decision to buy a stake in BG back in April 2015, it had thought the oil prices to touch a magic figure of $90/bb by 2018. “However, the current slowdown in the economy has reduced the oil-price outlook; that has pushed this deal backward,” says William Hares, Bloomberg.
While announcing the decision to buy a stake in BG Group, Shell had thought that both the companies would be able to generate improved cash flow by coming together. They would create a better portfolio, which would easily get rid of market adversities. But the huge loss that Shell has suffered recently has put an end to all those castles in the air.
Meanwhile, BG Group announced its intention to acquire stakes in a few coast of exploration blocks situated off the coast of Newfoundland from Repsol. At this moment, the company hasn’t made public any financial term. All three blocks that BG Group is interested in acquiring are run solely by Statoil.
