Factbox - What the Shell-BG deal says about oil prices and deal making

LONDON (Reuters) - Royal Dutch Shell agreed to buy smaller rival BG Group for 47 billion pounds ($70.2 billion) in the first major energy industry merger in more than a decade, closing the gap on market leader U.S. ExxonMobil after a plunge in oil prices. Below are some tentative answers from analysts to questions arising from the deal. HOW EXPENSIVE IS $70 BILLION? BMO Capital Markets said Shell is paying 66.6 times BG's forecast earnings for 2016, although Shell itself was trading at only 12.1 times its forecast earnings for next year before the deal was announced. HOW MUCH WILL BANKS GET IN FEES? According to estimates from Thomson Reuters/Freeman Consulting, three banks advising on the Shell/BG Group deal could earn a combined $182.6 million in fees. Goldman Sachs and Robey Warshaw LLP are expected to earn $50.3 million each for advising BG, with Bank of America Merrill Lynch earning approximately $82.0 million advising Shell. WHY PAY SUCH A PREMIUM? Richard Gorry, director at JBC Energy Asia, said most of the world’s hydrocarbon resources which are easy to develop are in the hands of state-owned companies in the case of OPEC countries, or quasi state-owned companies in the case of Russia. "The resources that are available to the international oil companies are very expensive to find and develop," he said. WHAT NEXT? Baring Global Resources Fund said: "We believe most other major oil companies are structurally underweight Brazil and U.S. onshore. Therefore, we believe that others need to follow Shell’s lead and invest in these regions." WHAT DOES THE DEAL TELL US ABOUT OIL PRICES? London Capital Group said: "A Shell-BG tie-up will ignite talk of other potential deals in the battered oil and gas markets. Many will see the deal as marking the bottom of the energy price slump and encourage more investors back into these areas." Henderson Global Investors said: "In buying BG, Shell is making a bold strategic bet that oil prices will recover towards the $70-90 level in the medium term." Oil prices fell towards $57 a barrel on Wednesday. WILL THE M&A FLOODGATE OPEN AFTER Shell DEAL? Wood Mackenzie said: "Most of the big players are weighing up opportunistic acquisitions, but few have the means or appetite for deals anywhere near this scale. Most of the majors are hamstrung by near-term financial stretch, and Asian NOCs (national oil companies) are contending with growing political scrutiny of M&A strategy, past and future. If you're looking to the next big deal, ExxonMobil stands out as most likely to pull the trigger. Companies that are unloved by the market but big in strategic resource themes – U.S. tight oil, East Africa LNG, deepwater or frontier exploration – will be the focus of their attention. But don't expect a wave of late '90s-style consolidation." WHO HAS DEEP POCKETS? Lombard Odder Global Energy Fund said: "Only Exxon has the flexibility to do big ticket deals like (the BG Group purchase). In contrast Total, ENI and Statoil will have to content themselves with the pick 'n mix counter.” WHAT ARE THE MID TERM RISKS? Henderson Global Investors said: "In the interim, Shell is taking on more risk in issuing more shares and also in paying out cash to BG shareholders. As a result their balance sheet will become more stretched. And this potentially puts some strain on this dividend as they redirect cash flows to paying down debt ahead of growing the dividend." Barclays said: "What will prove more difficult (for Shell) is in convincing its own shareholders that it can control capex of the combined entity and that the BG portfolio is capable of delivering the promised growth options beyond Brazil, something that, in our view, has been far from evident of late." (Reporting by Dmitry Zhdannikov; editing by David Stamp)