Could a mega-deal reshape the oil industry overnight?
According to CNBC, BP shares soared on Wednesday amid swirling rumors of a potential acquisition by rival Shell, only to close modestly higher after Shell firmly denied any discussions.
Early Wednesday, BP’s stock price rocketed over 10%, hitting a session high of $32.94. This spike followed a report from The Wall Street Journal suggesting Shell was in preliminary talks to acquire BP. The report, citing insiders, noted that any deal remained highly uncertain.
With a market capitalization of about $80 billion, BP would represent a colossal target. If Shell were to pull off such a move, it would eclipse Exxon’s $83 billion acquisition of Mobil in the 1990s as the industry’s biggest deal in decades.
However, Shell quickly poured cold water on the speculation. “This is further market speculation,” a Shell spokesperson told CNBC. “No talks are taking place.”
The spokesperson added, “As we have said many times before, we are sharply focused on capturing the value in Shell through continuing to focus on performance, discipline and simplification.”
After the initial frenzy, BP shares cooled off, closing at $30.32 with a gain of just 1.64%. The retreat reflects investor skepticism about a full-blown takeover.
Industry experts also doubted a complete acquisition. Sources indicated that if any deal materializes, BP might be broken up and sold in parts to various buyers rather than absorbed entirely by one company.
BP’s recent struggles have fueled much of this takeover chatter. The British oil giant has lagged behind Shell and American competitors, grappling with strategic missteps in recent years.
About five years back, BP unveiled bold plans to cut carbon emissions and pour resources into renewable energy. However, this green shift drew heavy criticism as profits stumbled.
Analyst Paul Sankey of Sankey Research didn’t mince words on CNBC’s “Power Lunch.” “BP’s attempt to turn an oil company into a renewable company was definitely a huge error,” he said. Sankey added, “It’s two very different costs of capital and they should have never gone near to it.”
Earlier this year, BP pivoted again, recommitting to its core oil and gas operations while scaling back renewable investments. This strategic reset has done little to quiet speculation about its future.
Adding to the pressure, activist investor Elliott Management revealed a stake exceeding 5% in BP this April. This move has intensified expectations that BP will face demands to prioritize its fossil fuel business over experimental ventures.
For investors watching this saga, BP’s volatility offers both risk and opportunity. While a Shell takeover seems unlikely now, the market’s reaction shows how quickly sentiment can shift in this sector. Consider monitoring BP for value plays, but tread cautiously—mega-deals are rare, and breakups could dilute returns.