NEW YORK (TheStreet) -- How aggressive was Royal Dutch Shell's (RDS.A - Get Report) $70 billion deal to buy British oil and gas producer BG Group (BRGYY? So aggressive that oil may have to rebound all the way to $100 a barrel by 2020 to justify the price that Shell paid, according to an analysis by the Norwegian research firm Rystad Energy.
The price can be taken as a measure of the pressure Shell faces to get its hands on new assets in an environment in which many offshore oil and gas assets are expensive to bring to market, and because Shell hasn't been a major force in fracking in the United States, said Per Magnus Nysveen, head of analysis at Rystad.
Either way, the 50% premium Shell paid over BG's pre-deal share price makes clear that the giants are not picking up assets on the cheap -- at least not yet -- thanks to the oil bust.
One reason: Oil and gas producers have been able to raise money in both stock and bond markets, keeping conditions from pressing them in the short term, a new study from Moody's Investor Service says.
"A lot of things have to happen before Shell can create value from this transaction,'' Rystad's Nysveen said in an interview from Oslo. "The deal is justified if you think oil will go to $100. They paid $1 for a dollar [of assets]. Normally you hope to pay 80 cents if you buy something uncertain.''
More than half of BG's value comes from its stake in the giant Lula oil field in the ocean off Brazil, which is actually controlled by Brazil's national oil company, Petrobras, Nysveen said.
That oil costs about $60 a barrel to produce, he said. That's far more expensive than oil from the Middle East and even more expensive than much, but not all, of the oil emerging from the U.S. shale patch, where some counties in North Dakota report average costs at half of that level.