Shell Stock (SHEL) Climbs on BP Takeover Talk Despite Warnings it Could ‘Destroy Value’

Shares in oil giant BP (BP) leaked over 3% today as investors digested the recent chat about a potential takeover by rival Shell (SHEL)

Shell stock was up 0.6% in pre-market trading despite one analyst’s suggestion that such a takeover of struggling BP could destroy the company’s valuation.

Worth The Hassle?

“Anyone buying BP, whether that is Shell or another peer – would need to prepare themselves for a potentially complex deal,” said Russ Mould, investment director at AJ Bell. “On paper, you would think parking together two companies in the same sector would be easy; in reality, this could take a long time to execute and integrate.”

He made the comparison with Shell’s acquisition of BG for £47 billion in 2015.

“Shell has been through this hassle before. That acquisition has turned out to be a good one, but most transformational deals destroy, not create value,” he warned.

It emerged earlier this week that Shell is considering the possibility of acquiring BP. A deal would be one of the largest in the sector’s history and create a powerful industry giant.

BP’s Troubles

According to newspaper reports Shell was consulting with its advisers but were wary of making a move given the recent volatility of oil prices following President Donald Trump’s tumultuous tariff strategy. A Shell spokesperson, as reported by The Independent, said: “We are sharply focused on capturing the value in Shell through continuing to focus on performance, discipline and simplification.” Some sources also noted that other major energy firms are exploring the possibility of making a bid for BP.

BP has a valuation of around $72 billion compared with Shell’s $196.4 billion. BP’s share price has slipped 21% over the last 12 months, with Shell only down 7%.

BP’s poor performance has been blamed by its activist hedge fund investor Elliott Management on its renewable energy focus. It has managed to make BP do a U-turn and commit to a fossil fuel first strategy with the selling off of renewable energy assets.

Its chairman Helge Lund will also step down sometime next year and perhaps sooner given the company’s stormy AGM last month.

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