Shell is talking to advisers about the potential for a takeover of the rival oil producer BP, according to reports.
The oil company has been discussing the feasibility and merits of a takeover of BP with its advisers in recent weeks, according to a report from Bloomberg, which cited people familiar with the matter.
If this were to happen, it would mark one of the biggest deals ever in the oil and gas industry.
Speculation about a possible takeover comes as BP’s shares have suffered this year. They have fallen by more than 30% in the past 12 months as a turnaround plan under the chief executive, Murray Auchincloss, has failed to inspire investors and oil prices have fallen.
Shell may also wait for BP to reach out for another possible suitor to make the first move, those familiar with the matter told Bloomberg. Deliberations are allegedly still in the early stages, and Shell could decide to focus on share buybacks and smaller acquisitions rather than such a big merger, according to the report.
The combination of Britain’s biggest oil companies would be one of the largest deals ever in the sector. Shell’s market value of £145.6bn is more than double that of BP, at £55.9bn.
A spokesperson for Shell told the Guardian: “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.”
A spokesperson for BP declined to comment.
In February, Auchincloss promised to “fundamentally reset” BP’s strategy, with the changes expected to include a watering down of its climate commitments and the pursuit of new fossil fuel projects in an attempt to bolster its market value.
The company’s profits dropped by almost 50% in the first three months of this year to $1.4bn (£1bn), down from $2.7bn in the same period last year. Its flagging share price has also made the company a target for the New York hedge fund Elliott Management.
The shares have lagged behind other oil and gas firms in recent years after its former chief executive Bernard Looney set BP on course to become a net zero energy company. He left BP abruptly in September 2023 after admitting he failed to fully disclose his relationships with female colleagues to the board.
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On Friday, Shell reported adjusted profits of $5.6bn in its first quarter, down 28% compared with the same period last year but ahead of what City analysts had been expecting.
Wael Sawan, the chief executive of Shell, told the Financial Times that he would rather buy back more of the company’s own shares than launch a takeover bid for BP.
“We will always look at these things, but you are also looking to see what is the alternative,” he said. “Right now, buying back Shell for us continues to be absolutely the right alternative to go for.”
