Shell is considering a BP acquisition after the oil giant is vulnerable to the net zero spiral pivot.
According to Bloomberg, the FTSE 100 giant shell is seriously exploring the feasibility and benefits of BP. It is interacting with consultants to plan the look of a deal.
On BP’s green energy approach, it emerged in the turmoil of BP. The company vowed to cut its oil and gas production and invest heavily in renewable energy in 2020, the largest net commitment of the fossil fuel industry.
However, the strategy failed to provide financial returns, and BP recently abandoned the plan to support a focus on oil and gas. It follows huge pressure on management by the U.S. hedge fund Elliott Management, which has become one of BP’s largest shareholders after establishing a 5% stake.
BP’s chaos caused its stock price to decline. Stocks have fallen 30% over the past 12 months, and the stock price is only 11% higher than the stock when BP launches its green energy strategy. By comparison, Shell’s stock has been concentrated on oil and gas over the past five years, nearly 90%. This divergence left only £5.5 billion in pounds compared to Shell’s £14.8 billion.
There has been long speculation about the combination of Shell and BP, but a deal could face strict political scrutiny and draw the attention of competition regulators. Any transaction will also cause fees from consultants and bankers.
It is understood that Shell is investing time before deciding whether to bid or not and waiting for further declines in BP’s stock and oil prices.
A Shell spokesman said: “As we have said many times, capture Shell’s value while we focus on continuing to focus on performance, discipline and simplification.”
Shell CEO Wael Sawan told analysts on Friday that the oil giant “of course…will keep studying inorganic opportunities” for growth, but said the deal “bars are high”.
He believes that buying back Shell’s own shares is currently of the best value. Mr Saen said: “I have said in the past that we want to be value hunters. Today, I think value hunting – buying back more shells.”
The CEO added that Shell needs to “own its own house” before a large takeover.
BP’s flutter can help improve shell output by gaining more exposure to the United States. BP has significant operations in the Gulf of Mexico and announced new discoveries last month.
This will also help build proportions to better compete with the U.S. oil giants with a small value shell. Exxon Mobil, for example, is worth $45.9 billion (£3.45 billion).
