Reports are linking Royal Dutch Shell (RDSB) with an $8bn bid for private US firm Endeavor Energy. A deal which would boost the company’s exposure to the Permian basin in Texas and New Mexico, where the company already has a joint venture with Anadarko Petroleum.

If the speculation proves accurate this would represent the most material deal for Shell since it parted with nearly $50bn for BG back in 2016.

Royal Dutch Shell is weaker along with the rest of the sector today, down 1.9% to £22.79 thanks to lower oil prices driven by fears of a supply glut.

AJ Bell investment director Russ Mould describes the suggested price tag as 'interesting'. He adds: 'It is a long way short of the $15bn that was apparently expected from a sale of Endeavor when the privately-held firm put itself up for sale earlier this year.

'This reflects the impact the recent crash in the oil price might have had on confidence in the sector. It might also be a reason this prospective transaction doesn’t happen and why anyone hoping for more widespread industry M&A could end up being disappointed.

'Agreeing a fair price for an oil and gas takeover is tricky when commodity prices are volatile as the selling party will be very wary of being cheated by a short-term slump and looking silly if prices recover. The exception is when the seller's hand is forced by a stretched financial position.'

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Issue Date: 18 Dec 2018