Shell's bid on BG Group will not unleash wave of M&A among big companies, says Westhouse

The deal sparked speculation that it may mark the start of a new round of industry consolidation, a phenomenon not seen since the late 1990s, as businesses adapt to the new norm of depressed crude prices.

However, the broker added that "anti-trust issues will prevent the bigger players combining".

Instead, Westhouse believes M&A is necessary among mid-sized and smaller players such as Tullow Oil, Ophir Energy and Dragon Oil, Soco International and Genel Energy, in particular.

Furthermore, it added that smaller companies need to consolidate as there are "too many sub-scale, poorly funded, single asset/country companies listed on public markets".

"In our view, stocks such as Circle Oil, Faroe Petroleum, Rockhopper Exploration, Ithaca Energy, Bowleven, Parkmead, Lekoil and Chariot Oil & Gas are all candidates for takeover given their depressed valuations relative to their portfolios," analysts Mark Henderson and Jamal Orazbayeva wrote.