Jamie Spencer
Shell Explores Potential Acquisition of BP
Shell is reportedly in discussions with advisers about the feasibility of acquiring rival oil giant BP. According to sources familiar with the matter, Shell has been exploring the potential benefits and logistics of a takeover in recent weeks. If it happens, this could become one of the largest mergers in the oil and gas sector.
BP Struggles as Shares Fall
BP’s shares have dropped by over 30% in the past year, mainly due to a lackluster turnaround strategy under CEO Murray Auchincloss. Despite efforts to revamp BP, the company has struggled to regain investor confidence, compounded by falling oil prices. This underperformance has led to speculation about a potential sale or merger, with Shell being the most prominent potential suitor.
Shell’s Position and Possible Alternatives
Shell, with a market value of £145.6bn, is more than double the size of BP, which is valued at £55.9bn. While discussions are still in the early stages, Shell may opt to wait for BP to seek other suitors or focus on its current strategy of share buybacks and smaller acquisitions. Shell’s spokesperson emphasized their focus on capturing value through performance, discipline, and simplification rather than large mergers at this point.
BP’s Financial Struggles and Strategic Shifts
BP’s profits fell by nearly 50% in the first quarter of 2025, dropping from $2.7bn to $1.4bn. The company’s underwhelming share price performance has made it a target for hedge funds like Elliott Management. CEO Auchincloss recently vowed to reset BP’s strategy, which may include scaling back on its climate goals and focusing more on traditional fossil fuel projects to boost market value. BP’s earlier pivot toward becoming a net-zero company under former CEO Bernard Looney faltered, especially after Looney’s abrupt departure in September 2023 following revelations about undisclosed relationships with colleagues.
Shell’s Earnings and CEO Perspective
Shell recently reported adjusted profits of $5.6bn for Q1 2025, a 28% decline compared to last year, though it exceeded analysts’ expectations. CEO Wael Sawan stated that while Shell always evaluates potential acquisitions, the company is currently prioritizing share buybacks over a potential BP acquisition. Sawan emphasized that repurchasing shares continues to be the best option for Shell at this time.
