A slide in BP’s stock price has made the UK energy major vulnerable to acquisitions as rivals have the opportunity to buy at a sudden discount and end its 116 years as an independent company.
Listed companies Shell, Chevron, ExxonMobil, Total Energy, and ADNOC in Abu Dhabi run the numbers individually, according to industry sources and advisors, but oil trader Vitr could be interested in the elements of the business.
The total valuation of parts suggests that BP’s assets are worth more than £120 billion without including liabilities and liabilities, with its current market capitalization being more than twice the £57 billion, following a sharp decline in stocks over the past 12 months.
“BP’s continued misperformance has opened it up to acquisitions,” said someone close to activist investor Elliott Management, who built the company’s main stock.
M&A teams from major oil companies routinely evaluate the business cases of major acquisitions. Additionally, while BP trading is complicated and raises competition and political concern, awards are important.
BP’s oil and gas assets, worth $820 billion in the Gulf of Mexico and the US shale business alone, exceeds market value, according to UBS analyst Joshua Stone. However, the UK company is overwhelmed by $77 billion in debt and long-term debt, including those derived from the 2010 Deepwater Horizon oil spill.
Gulf of Mexico BP Oil Delic ©Jessica Resnick-off/Reuters
shell
The BP trade is transformative for Shell, creating a huge amount of energy pumping nearly 5 million barrels of oil and gas per day. In addition, a quarter of the global LNG market has a big presence in the United States.
Shell Chair Andrew Mackenzie has worked for BP for over 20 years, and Shell has looked into combining it with BP several times in the past.
Shell has spent most of the past two years improving her financial health. Chief Financial Officer Sinead Gorman told analysts last week that he was washed away with “over $35 billion” of cash and “located incredibly well” to hit the deal.
In Shell’s case, the most attractive elements of BP’s portfolio are gas and LNG assets. Its CEO Wael Sawan told FT last week he hopes that Shell will become a ‘uncontroversial leader in integrated gas and LNG.’
Wael Sawan, Chief Executive Officer © Christopher Pike/Bloomberg
However, when asked if he wanted to buy BP, Sawan replied that buying the shares would be better value for investors in his company.
Analysts are not sure about the merits of a transaction. “We’re struggling with mathematics,” said Biraj Borkhataria, an analyst at RBC Capital Markets, who questioned whether Shell wants to have a BP trading business or whether he wants to do business in Azerbaijan, India, Iraq and Abu Dhabi.
“Shell would be much better at continuing that (current) plan,” he added.
According to insiders at both companies, it takes years to integrate the two businesses with very different cultures, but there are tens of thousands of unemployment, perhaps a potential political issue for the UK government.
However, the cost to the shell of the sitting idol can be high. “Can they really stand on the sidelines and have someone else buy BP?” asked one investor.
ExxonMobil and Chevron
As Exxonmobil and Chevron evaluate how BP trading stacks up in their US majors, they’re caught up in their own high-stake stake over drama.
Chevron’s $53 billion deal with energy company Hess will soon expect an arbitration ruling. This will give Guyana’s Stabroek block a large investment. Exxon claims that ownership of shares in the same block will initially refuse to buy the rest.
As a result, Andrew Gillick of the research group Embelus said, “Chevron and ExxonMobil are focused on Hess.” However, an unfavourable ruling against Chevron could force the US group to seek growth elsewhere.
Chevron’s $53 billion deal for energy company Hess©Bloomberg has arbitration ruling soon
Both US companies were attracted to BP’s gas and trading business, allowing them to pay “a hefty premium” compared to their European rivals, according to Michael Alfaro of Hedge Fund Gallo Partners.
Exxon CEO Darren Wood told analysts last week that he was “continuously watching” the opportunity, especially as some companies with weaker oil prices left vulnerable companies.
Trans-Atlantic partnerships could have political challenges, according to Dunpickering, chief investment officer at Pickering Energy Partners in Houston. “We’ll put the odds to run (for BP) with the exon and chevron being pretty low,” he said. One banker said BP’s assets were not attractive enough for Exxon.
Exxon and Chevron did not respond to requests for comment.
Adnock
The Abu Dhabi National Oil Company dates back to the discovery of oil in the United Arab Emirates in 1958 and has a close ties with BP. BP owns minority stakes in ADNOC’s land and LNG businesses, and the pair has a joint venture in Egypt.
Former BP CEO Bernard Rooney has been on the board of directors of ADNOC subsidiary, and the Abu Dhabi company is keen to expand internationally, recently trading billions of dollars of gas and chemicals.
A veteran of the oil industry said there was a “couple along the value chain” with BP as ADNOC did everything from extracting oil to refinement and trading oil products.
Two other industry sources have suggested that the UK government could accept BP transactions if it is part of the UAE’s broader investment plan in UK assets.
However, relations between the two countries were damaged by a disturbance centered around a bid backed by the Telegraph Newspaper’s 2023 Emirati. ADNOC will be cautious about bumping into repeated episodes.
In 2015, the UK government under David Cameron warned that it would oppose attempts by foreign companies to buy BP. In recent weeks, BP has been yelling people near the government about whether Kielstarmer will try to defend the takeover, according to two people with knowledge of effort.
ADNOC declined to comment.
Total energy
French Total Manager trading boss Patrick Puyanne is interested in BP’s gas and LNG assets as he can enjoy the plunge of the proud British oil company and is hoping that the third largest global LNG provider will catch up with Shell.
But like Shell, the total is busy buying back stocks, and Puyanne told analysts he must compare the appeal of the buyback to whether it can “make a beautiful acquisition.”
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Totalenergies, who declined to comment, is one of the few suitors interested in BP’s clean energy assets as it is committed to growing its own renewable electricity business.
Elsewhere, however, analysts said they are not very keen on BP’s refineries, their US shale businesses, or US offshore assets, given the anti-wind stance of the Donald Trump administration.
Ahmed Ben Salem, an analyst at Oddo BHF, a French German financial group, said Total could find a deal that is easy to pursue elsewhere.
“If you just want to keep some apartments, what’s the point of buying a building?” he said.
