Shell evaluates an unprecedented acquisition: the purchase of the British rival BP. According to Bloomberg, the Anglo-Dutch giant would have commissioned its consultants to conduct preliminary analyzes in view of a potential offer, which however would depend on a further decline in the BP title and the price of oil, a condition that would make the operation more advantageous.
The dossier is still in the embryonic phase, but reports a potential change of course in the group’s strategy, which only a few days ago, by voice of the CEO Wael Sawan, had reiterated the preference for the repurchase of its own actions compared to large M&A operations.
How much they are worth Shell and BP
For several years, BP and Shell have had almost equal dimensions, but in recent years the second has grown up to almost double the first, with a market value of about 149 billion pounds. Shell reported solid results this week of the first quarter, exceeding profit expectations, and started a 3.5 billion dollar share buyback program. BP instead has a value of approx 56 billion.
A possible acquisition would create a giant capable of competing directly with giants such as Exxonmobil and Chevron. However, there is no shortage of pitfalls: an operation of these dimensions would attract the attention of the antitrust authorities and would require a profound integration between two complex and articulated structures.
The delicate moment of the Oil sector
The market context makes the scenario even more fluid: the BP actions are under pressure and the price of oil has fallen to the lowest levels of the last three years. The Opec+, led by Saudi Arabia, intervened to complicate the picture, which announced two consecutive increases in production for May and June as a punitive measure towards the member countries, including Iraq and Kazakhstan, who exceeded the agreed shares.
A surprising decision in a moment of weak question and growing geopolitical tensions, which has already had a significant impact on the markets: the price of the WTI has collapsed from 71 to 58 dollars To the barrel in less than a month, recording a drop of 18%. In the last week, the drop was 7%, frustrating any residual hypothesis of rebound.
However, this context of weakness has a double face for the big names in the sector: if on the one hand it puts the operating margins under pressure and undermines the trust of the investors, on the other it opens the way for possible consolidation operations at low costs.
BP problems
Meanwhile, BP tries to go up the china. The new CEO, Murray Auchinclosshas put in place a 20 billion dollar divestment plan by 2027, accompanied by cuts to shopping and equity buyback programs to reassure increasingly impatient investors. Among these stands out Elliot Investment Management, the activist fund that exceeded 5% of the capital and is pushing for a change of pace in the strategy and more efficient management.
The collapse of the price of crude oil is therefore intertwined with a game of power and strategic vision intended to redefine the balance of the entire European energy sector. The sector moves on an unstable fault, in which each move can produce shock waves globally.
