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Shell weighs BP takeover amid market uncertaintyShell Plc is considering acquiring BP Plc, awaiting further drops in stock and oil prices. Talks are early, with Shell also eyeing share buybacks and smaller acquisitions.By Bloomberg  May 4, 2025, 11:02:58 AM IST (Published)4 Min ReadShell Plc is collaborating with advisers to evaluate a potential acquisition of BP Plc. However, it is waiting for further declines in stock and oil prices before making a decision, according to sources familiar with the matter.

The oil giant has been discussing the feasibility and merits of a BP takeover more seriously with its advisers in recent weeks, the sources said, requesting anonymity due to the private nature of the information. A final decision will likely depend on whether BP's stock continues to fall, the sources added.

BP share price performance

BP shares have already dropped nearly a third in value over the past year, as a turnaround plan has failed to gain investor support and oil prices have plummeted.

Shell may also wait for BP to make the first move or for another suitor to step in, and its current evaluation could help it prepare for such scenarios, according to some of the sources mentioned.

Deliberations are still in the early stages, and Shell might choose to focus on share buybacks and smaller acquisitions rather than a large merger, they said. Other large energy companies are also considering whether to bid for BP, the sources noted.

"As we have said many times before, we are sharply focused on capturing value in Shell through continuing to focus on performance, discipline, and simplification," a Shell spokesperson stated in an email. A BP representative declined to comment.

A successful merger of Shell and BP would be one of the largest-ever takeovers in the oil industry, combining two iconic British majors in a deal that has been discussed intermittently for decades.

Largest-ever takeovers in oil industry

The companies were once close rivals with similar size, reach, and global influence, but their paths have diverged in recent years. Shell's stock has fallen about 13% in London trading over the past year, giving the company a market value of £149 billion ($197 billion), more than double BP's £56 billion market capitalization.

BP has struggled with prolonged underperformance, mainly due to a net-zero strategy under former CEO Bernard Looney. His successor, Murray Auchincloss, announced a reset in February, including a shift back to oil, cuts in quarterly share buybacks, and asset sales.

US President Donald Trump's trade war and a surprise increase in supply by OPEC+ have since pushed Brent crude below $70 a barrel, BP's financial target price, causing investor impatience.

Activist firm Elliott Investment Management has publicly disclosed a 5% stake in BP and is urging the company to consider more transformative measures. Elliott views BP's plan as lacking ambition and urgency, potentially exposing the company to a takeover, Bloomberg News reported in April.

Under CEO Wael Sawan, Shell has also been cutting costs, shedding underperforming renewables units, and refocusing on fossil fuels. While Shell's stock has outperformed Chevron Corp. and Exxon Mobil Corp. in recent years, its valuation has not yet matched that of its major US rivals.

Shell to look at inorganic opportunities

Sawan told analysts on Friday that Shell will continue to look at inorganic opportunities but will be prudent, noting that "the bar is high." Any deal would need to increase free cash flow per share relatively quickly, he said.

"I have said in the past that we want to be value hunters. Today, value hunting—in my view—is buying back more Shell stock," Sawan stated during the conference call. He added that Shell needs to "have our own house in order" before considering sizable acquisitions and that there is "more work to do" to reach its full potential despite recent progress. Shell is pursuing deals where it can create value, such as its purchase of liquefied natural gas trader Pavilion Energy Pte, Sawan noted.

A successful takeover of BP could enhance Shell's output growth by allowing the company to regain exposure to the US, following its sale of Permian Basin shale assets to ConocoPhillips in 2021.Continue ReadingCheck out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!TagsBP PlcMergerOil and Gas companyShellTakeover