Shell mulls potential BP deal as stock stalls: Bloomberg
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The news: Shell is currently speaking with advisors to assess a possible acquisition of British oil major, BP, according to sources cited by Bloomberg.
The numbers: BP posted weak earnings last week, missing Q1 expectations, claiming that weakness in gas marketing and trading was to blame for the company’s 49% year-on-year fall in profit. BP posted underlying replacement cost profit, used as a proxy for net profit, of USD1.38 billion ($2.25 billion), a sharp decline from the USD2.7 billion posted in Q1 2024.
The context: Sources told Bloomberg that Shell is waiting for BP’s share and oil prices to decline further before making the decision about pursuing a bid. A final decision is likely to depend on the stock price coming down further, the sources say.
Shares in the UK company have lost almost one third of their value in the past 12 months, after CEO Murray Auchincloss’ turnaround plan failed to satisfy shareholders.
Auchincloss has been under significant pressure since activist hedge fund Elliot Investment Management revealed it holds a 5% stake in the company, and is calling on the company to deliver on improvements.
While BP has been struggling to perform at pace with peers including Shell, Exxon and Chevron, CEO Auchincloss said he is “confident” in BP’s restructuring plans to strengthen the balance sheet, reduce costs and improve cash flow and returns on last week’s investor call.
Auchincloss did not speculate on whether the company is a takeover target, and confirmed that BP has not asked the UK government for financial assistance.
“What I will say is we’re a strong, independent company and we’ve got sector-leading growth. And if we can deliver the sector-leading growth, and the first quarter is a fantastic example of that, then I have no concerns. I think we’re going to do great,” Auchincloss said.
The Bloomberg report follows an FT report late last week which saw Shell CEO, Wael Sawan, state that he would prefer to buy more Shell stock rather than pursue a BP acquisition. “Right now, buying back Shell [shares] for us continues to be absolutely the right alternative to go for,” Sawan said.
The sources: Bloomberg, FT, Capital Brief
