Latest news with #ShellBP
Times
4 days ago
- Business
- Times
Shell's pause on BP takeover gives all sides a useful breather
The swimming pool has gone from the basement at Shell Centre, the London headquarters of the FTSE 100 oil and gas company, as has the rifle range. The latter went about 20 years ago, while the pool was a casualty of the 2016 redevelopment of the sprawling South Bank site, which sits in the shadow of the London Eye. Some things don't change, however, and Shell staff would have heard the news this week that their employer had looked at buying BP with a shrug of the shoulders. Not that old chestnut again! 'Shell + BP = British energy behemoth' is an equation that has been chalked on many blackboards over the years, mostly those of eager investment bankers dreaming of enough fees to pay for an early retirement. Sometimes it has been more than just a dream. It came up during the oil-industry merger mania of the late 1990s, when the oil price dropped to $10 a barrel. John (now Lord) Browne raced off in a different direction, doing an astonishing string of deals including mergers with Amoco and Arco in the US and breaking into Russia with the creation of TNK-BP, a deal that two decades later still looms large in any discussions of BP's future. Browne reportedly looked quite hard at the merits of a Shell merger just before he left in 2007 after falling out with his chairman, the late Peter Sutherland; the proposed deal added to the friction. This was later dismissed as 'scenario planning,' but Tony Hayward, Browne's successor, had to deny the pair were talking not long after he took the job. Hayward soon had other things to worry about: a fatal blowout on the Deepwater Horizon drilling rig in the Gulf of Mexico caused one of the world's biggest oil spills. That eventually cost Hayward his job and BP some $65 billion. Now the deal is back on again — sort of. Bloomberg reported in May that Shell was looking at making a move and The Wall Street Journal said this week that the two companies were in early talks. Not so fast! Shell poured cold water on the whole thing with a statement to the stock exchange on Thursday saying 'it has not been actively considering making an offer for BP'. You might think this means the bankers will have to rethink their early retirement plans, but that is not necessarily the case. Shell's statement means it is barred (by rule 2.8 of the City takeover code) from making an offer for six months. The rule, however, does not much restrict its room to manoeuvre. Shell can jump in if someone else makes a move on BP, if the board of BP agrees to a Shell approach, or if Shell can manage to convince the Takeover Panel, which polices the code, that there has been 'a material change of circumstances'. In reality, Thursday's statement means Wael Sawan, Shell's chief executive, is keeping his powder dry. He can sit back, do more work on whether a deal makes sense and has the option to get involved if a rival tries to beat him to the punch. There are three good reasons for Sawan wanting to wait. First, he has only been chief executive for two years and is still working his way through his big internal transformation plan. The next stage, amalgamating what were separate technical divisions into the operating businesses, is due to kick off early next year. Complicating that shake-up with the integration of BP could be a nightmare and many big deals fail on the difficult nitty-gritty of merging two different company systems and cultures. CHRIS DUGGAN Second, the oil price may work in his favour. One of the surprises of the past fortnight is how muted the market's reaction was to the Israel-Iran hostilities and the American attack on Iran's nuclear facilities. Despite all the talk of $100 a barrel, the price hovered around in the mid-70s last week and dropped to $68 after Donald Trump 's announcement of a ceasefire. That suggests, as many analysts have pointed out, a well-supplied market, with the likelihood of lower prices should tensions in the Middle East ease. Lower prices makes life trickier for BP and has in past always been the catalyst for oil industry deals. • Does it make sense for Shell to buy BP? Third on Sawan's list is the Russia-Ukraine war. A ceasefire could help to push the price down and might also give some clarity on BP's Russian interests. It said three years ago it would get out of its 19.75 per cent stake in Rosneft (the legacy of Browne's TNK deal) but hasn't yet found a way to do it, leaving the shares in limbo. The pause should also give ministers time to think about how they might react if the merger ever became a reality. Having an oil major based on home soil is extremely useful to governments for all kinds of reasons: advice on energy markets, intelligence from interesting parts of the world where the local BP or Shell manager might be better plugged in than the British ambassador, and head offices that provide hundreds of well-paid highly-skilled jobs and, sometimes, a lucrative stream of tax revenue. Britain has been fortunate to have two, and it would probably not be too much of a blow if they united as one much larger entity. It would be a serious blow, however, if the merged company decided, as some multinationals have in recent years, that it would be better to have a primary share listing in the United States rather than the UK. Sawan has been asked about this in the past and given guarded answers, saying that Shell might have to look at 'all options' if US oil companies continued to attract a higher valuation than those listed in London. A shift across the Atlantic would be a grievous wound to the already struggling London stock market. On top of that would be the loss of jobs and all that intangible value oil and gas companies can quietly provide. Shell's six-month pause gives its management time to reflect on what to do next and the government time to work on plans to make sure that if a merger does happen the combined company stays here.
Times
5 days ago
- Business
- Times
Shell's pause on BP takeover deal gives all sides a useful breather
T he swimming pool has gone from the basement at Shell Centre, the London headquarters of the FTSE 100 oil and gas company, as has the rifle range. The latter went about 20 years ago, while the pool was a casualty of the 2016 redevelopment of the sprawling South Bank site, which sits in the shadow of the London Eye. Some things don't change, however, and Shell staff would have heard the news this week that their employer had looked at buying BP with a shrug of the shoulders. Not that old chestnut again! 'Shell + BP = British energy behemoth' is an equation that has been chalked on many blackboards over the years, mostly those of eager investment bankers dreaming of enough fees to pay for an early retirement. Sometimes it has been more than just a dream. It came up during the oil-industry merger mania of the late 1990s, when the oil price dropped to $10 a barrel. John (now Lord) Browne raced off in a different direction, doing an astonishing string of deals including mergers with Amoco and Arco in the US and breaking into Russia with the creation of TNK-BP, a deal that two decades later still looms large in any discussions of BP's future.
Yahoo
5 days ago
- Business
- Yahoo
Shell Dismisses BP Takeover Talks as Mere ‘Speculation'
One of the world's biggest oil companies seems to have sprung a leak – no, not in one of its tankers, in its deal room. But the information that seeped out has been called into question. On Wednesday, The Wall Street Journal reported that UK-based multinational oil giant Shell was in early-stage talks to acquire British rival BP, citing 'people familiar with the matter.' It's unknown if the newspaper's tip was shucked from inside Shell's yellow pecten scallop logo, beamed from BP's green and yellow sunburst or sourced from a knowledgeable insider elsewhere. But one thing's for certain: Shell denies it's happening. 'No talks are taking place,' a spokesperson told The Daily Upside. READ ALSO: Dwindling IPOs Reward Investors With Return Bonanza and After Reclaiming 'World's Most Valuable Company' Crown, Nvidia Gilds the Tiara According to the Journal's report, Shell and BP reps are in active discussions, and BP was said to be considering the prospect of being taken over 'carefully.' BP's $82 billion market cap, which is less than half of Shell's $210 billion, means if a deal ever materialized, its value would likely exceed that of the $83 billion ExxonMobil merger in 1999, factoring in the likely acquisition premium. The possibility of a Shell-BP merger has fascinated markets and analysts since the 1990s. Speculation has intensified in recent years as BP stumbled out of the Deepwater Horizon disaster in 2010 into a bad bet on Russia's Rosneft that went south after the country invaded Ukraine and a series of underwhelming renewables ventures. A megamerger of this sort would, theoretically, be of interest to Shell because it would vault it closer to ExxonMobil's $468 billion market cap and likely beyond Chevron's $248 billion. Bloomberg reported that Shell was studying the idea of acquiring its UK rival in May, something Alphavalue analysts figured would probably involve a cash-and-stock payment. The Journal's report on Wednesday made clear that a tie-up is 'far from certain,' according to the paper's sources. Whether the reported talks are merely 'further market speculation,' as the Shell spokesperson characterized them, or not, investors took both the news and Shell's denial seriously: BP shares initially rose as much as 10% following the Journal's report Wednesday, but after Shell's rebuff, they reversed course, narrowing their gains to 1.6%. Shell shares were down 1%. '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,' Shell's spokesperson added. BP did not reply to a request for comment. Even without a Shell-BP deal, the energy sector still has a major pending tie-up, with Chevron's $53 billion acquisition of Hess awaiting the outcome of a legal challenge by Exxon over a Guyana oil field in which both it and Hess have stakes. Doubling Down: BP has pledged to boost its oil and gas production and trim its renewable investments after a run of underwhelming returns, with activist investor Elliott Management, which owns 5% of the company, leading a shareholder push for improvement. Shell has made similar pledges to focus on more profitable oil operations but ironically, Elliott took a major short position against the company in March. This post first appeared on The Daily Upside. To receive delivering razor sharp analysis and perspective on all things finance, economics, and markets, subscribe to our free The Daily Upside newsletter.
Yahoo
5 days ago
- Business
- Yahoo
Shell probably won't buy BP: Here's a 'more realistic' outcome
A potential Shell (SHEL) and BP (BP) merger is on investors' minds after The Wall Street Journal reported Shell is in early talks to acquire BP, though Shell has denied the report. Tortoise senior portfolio manager and managing director Rob Thummel says it makes sense for the two energy companies to combine, but it's unlikely that Shell would buy BP outright, explaining that it's more probable that BP will sell parts of its business to Shell and others. To watch more expert insights and analysis on the latest market action, check out more Market Catalysts here. While Shell is denying the Wall Street Journal report that it's in talks with BP about a possible merger, our next guest says a deal could be a first step towards improving the valuations of the combined company. Here with more, we've got Rob Dummel, who is the Tortis Senior portfolio manager and managing director. Great to have you here with us. So, just take us into your analysis of the deal-making environment now through the lens of Shell and BP, and what it could mean for the sector. Well, so, so thanks for having me. So, if you just look at what's happening in the overall sector, obviously commodity prices are down. Oil prices are down a lot. And so, it's hard for deals to be made today, uh, just because, uh, because of the low oil price. And a lot of these oil and gas producers, oil producers in particular, have really repaired their balance sheet so they don't need to do deals. But it's a little different for Shell and Shell and BP. So, if you look at the valuations of Shell and BP, they're really low. They trade at much lower valuations than their peers: Exxon, Chevron, Total. So, obviously, there are a lot of investors that are looking for ways to unlock that value. I know Elliott's been active in in BP to try to, to try to encourage them to sell several of their assets to try to realize and get the market to recognize a more of a sum of the parts type of valuation. So, does it make sense for the two to combine? Uh, yeah, it probably does longer term if you think about, then what will the what will combined entity do? It's much bigger. Um, and then ultimately what it needs to do, and I think both companies need to do, is continue to be disciplined, continue to deliver cash back to the shareholders in the form of dividends and stock buybacks. And, and I think if you put all those together, then ultimately, you result in in an improving valuation. But, but clearly, there these, both of these stocks are at really discounted valuations. What is the likelihood that this deal even goes through knowing that there are now more restrictions in different parts of the world for this to be necessary or be possible to take place, considering British stock regulations that have now come more into light which would mean that essentially there would be a six-month period that Shell would have to wait, uh, if this indeed was rejected and, and ultimately they would have to find, uh, some other approach. Yeah, I, I think the odds of Shell buying BP as it is today is very low. Uh, um, what I think the more realistic, uh, possibility is that, you know, BP starts to sell off certain pieces of its business and then ultimately a combination between Shell and BP, uh, makes a little more sense. I think BP's obviously interested in the oil and gas producing assets, the Gulf of Mexico, um, some of its international oil and gas producing assets. Um, and I think BP has a little bit of LNG as well that, that that would, would be complementary. But, but uh, but there are other businesses, I think, inside of BP that that may make sense in the hands of other buyers rather than Shell. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
6 days ago
- Business
- Reuters
Breakingviews - Shell's BP time-out is a blessing in disguise
LONDON, June 26 (Reuters Breakingviews) - Wael Sawan can take a breather on BP (BP.L), opens new tab, at least for a bit. The boss of $207 billion UK oil major Shell (SHEL.L), opens new tab on Thursday delivered an authoritative rebuttal of a Wall Street Journal report, opens new tab that claimed he was in talks to buy his struggling $79 billion rival. UK takeover rules now restrict Sawan's options until next January, should he change his mind. But taking the plunge in 2026 makes more sense anyway. In recent months Sawan has repeatedly said he is focused on share buybacks and his strategic overhaul of Shell's costs, and not on its crosstown peer. But the WSJ story, which cited unnamed sources to assert that early talks were ongoing, moved the companies' New York-listed securities. The upshot is Shell's formal statement on Thursday morning, saying it has not made an approach, had talks, or harboured an intention to make an offer for its rival. That isn't the end of the story, though. While Shell can't now make a hostile offer for six months, it can agree a friendly one if the BP board plays ball. It can also lob in a bid if a third party does. With BP's market value less than 40% of Shell's, and the promise of chunky synergies, a UK mega-merger has strategic logic. That said, timing is important. Had Shell offered a 30% premium right now, BP's enterprise value would be $159 billion. Goldman Sachs analysts expect BP to make less than $17 billion in operating profit in 2026. Add in the $4 billion Shell might strip out in cost synergies – about 25% of BP's $16 billion of distribution and administration expenses in 2024 – and tax the total at the 40% tax rate BP guides to. The overall return for Shell would still be less than BP's capital cost of around 8%, as estimated by Morningstar. Next year things may look different. In 2025, Shell's shares have risen 4% while BP's are off 7%, even though Shell's estimated 12% free cash flow yield for 2026 suggests it's still undervalued. By late 2026 Sawan will be much further progressed with his turnaround plan and the two companies' valuation gap may have widened, juicing the return. The main risk for Sawan is that activist investor Elliott Investment Management helps whip BP into shape, hiking its valuation. The group might also locate a credible new chair who can extract a higher price out of Shell than incumbent Helge Lund, expected to leave in 2026. One potential candidate, former Anglo American boss Mark Cutifani, is leaving, opens new tab his role chairing Vale's base metals unit. But on balance, if Sawan does eventually fancy a tilt at BP he wins more than he loses by waiting. Follow Yawen Chen on Bluesky, opens new tab and LinkedIn, opens new tab.
