Reports suggest that Shell is in discussions with advisors regarding a potential acquisition of rival oil producer BP.
A Bloomberg report, citing sources familiar with the matter, indicates that oil companies have been evaluating the possibility and advantages of BP’s acquisition in recent weeks.
If this were to occur, it would be one of the most significant transactions in the oil and gas sector.
BP’s stock has struggled over the past year, declining by more than 30% due to a restructuring plan under CEO Murray Auchincloss.
Additionally, there’s speculation that Shell might wait for BP to connect with another potential buyer before taking action, according to insiders. The report notes that these discussions are still in the early phases, and Shell might prioritize stock buybacks and smaller acquisitions over such a large merger.
In terms of market size, Shell, valued at £145.6 billion, is more than double the size of BP, which stands at £55.9 billion. A spokespeople from Shell emphasized their focus on enhancing value through performance and discipline.
Meanwhile, a BP representative opted not to comment on the situation.
This year, Auchincloss pledged a “fundamental reset” of BP’s strategy, which is expected to involve scaling back climate commitments and pursuing new fossil fuel initiatives to boost market value.
Recently, BP’s profits fell nearly 50% in the first quarter, dropping from $2.7 billion the previous year to $1.4 billion (£1 billion), prompting attention from New York hedge fund Elliott Management.
BP’s stock performance has been lagging behind other oil and gas firms, a trend that began under former CEO Bernard Looney, who had steered the company toward becoming a net-zero energy provider before his abrupt departure in September 2023.
Last week, Shell announced an adjusted profit of $5.6 billion for the first quarter, a decline of 28% from the prior year, but still exceeding analysts’ expectations.
Shell CEO Wael Sawan mentioned in an interview that he prefers to prioritize share buybacks over pursuing a bid for BP, stating that while they explore options, acquiring BP remains a viable alternative.
