Why BP takeover speculation won't go away
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Shell's firm denial that it's eyeing acquisition of BP may tamp down chatter of a blockbuster deal for now — but it won't end speculation about BP's fate as long as it underperforms its Big Oil rivals.
Catch up quick: Hours after the WSJ's buzzy scoop Wednesday about "early stage" talks, a Shell spokesperson said, "This is further market speculation. No talks are taking place."
- "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," the company said.
- It also circulated execs' past comments about using capital to buy back shares, and the company's high bar for outside acquisitions. BP did not comment.
Yes, but: The idea of a Shell-BP mega-merger has been floating around for a while.
- BP has trailed Shell's and TotalEnergies' performance among European-headquartered giants.
- And Big Oil has gotten bigger among U.S. multinationals, with Exxon's roughly $60 billion acquisition of Pioneer Natural Resources that closed last year, and Chevron's efforts to acquire Hess.
What they're saying: "A combination could be the first step toward improving the valuations of the combined company" and boosting free cash flow, Rob Thummel, senior portfolio manager at Tortoise Capital, said in emailed comments about a Shell-BP tie-up.
- BP has recently pivoted back toward its core oil and gas business and gotten more selective about renewables, a move Thummel said recognizes its "core strengths."
- He notes BP's "top tier" assets in the Gulf of America (formerly the Gulf of Mexico), among other holdings.
The bottom line: Thummel was asked whether Shell's comments will put merger speculation to rest. He doesn't think so, noting BP trades at a "cheap valuation."
- "However, the ideal buyer for the various assets that BP owns might not be one company."
