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Shell plc SHEL is reportedly exploring a potential acquisition of British energy rival BP plc BP, a deal that could mark one of the largest mergers in the history of the oil industry. While no formal bid has been made, Shell is said to be quietly evaluating the strategic and financial feasibility of such a move, according to a Bloomberg report citing sources familiar with the matter.
Shell Eyes BP as Valuation Slides
Discussions inside Shell have gained momentum in recent weeks, driven largely by BP’s declining market capitalization. BP’s shares have lost nearly 22.4% over the past year due to weak oil prices, strategic missteps and investor discontent. Shell is reportedly monitoring BP’s market value and could make a move if conditions become more favorable, either due to further price declines or an indication that BP is open to external interest.
While a takeover is far from certain, Shell is preparing for different scenarios, including the possibility of another bidder stepping in. Sources note that Shell could use its early groundwork to act swiftly if needed.
At present, Shell’s market capitalization is more than double that of BP, standing at approximately $200.5 billion versus BP’s $76 billion. This highlights a significant divergence in performance and scale between the two London-based oil majors.
BP Struggles With Investor Confidence and Strategy Shift
BP’s vulnerabilities have become more apparent following a turbulent leadership transition. Former CEO Bernard Looney’s rapid push toward green energy alienated investors, and his successor, Murray Auchincloss, has since pivoted toward oil and gas assets. However, broader challenges, including macroeconomic uncertainty and increased crude output from OPEC+, have eroded BP’s financial footing.
Brent crude recently fell below $70 per barrel, complicating BP’s cash flow outlook and further straining shareholder patience. Activist investor Elliott Investment Management has taken a 5% stake in BP and is pressuring the company to enact more drastic changes to revive performance and fend off potential takeovers.
Shell’s Strategic Reset Prioritizes Value & Targeted Growth
Shell, under CEO Wael Sawan, is undergoing its own strategic overhaul. The company has been streamlining operations, trimming underperforming renewable energy units and refocusing on its core fossil fuel portfolio.
Shell's CEO recently stated that any major acquisition would need to substantially enhance the company’s free cash flow per share and overall returns. He emphasized that SHEL’s primary focus is on delivering value and that transformational deals would only be pursued if they align with the company’s long-term financial objectives.