Shares of BP, the British oil major, surged 7%. This spike came on the heels of news that BP is in preliminary discussions with Shell over a potential merger. This announcement has created a very positive buzz in the financial markets. It shows the effect that one pernicious merger between two of the largest global oil industry powerhouses could have.
According to these reports, BP and Shell have not reached finality on their discussions, still in early stage conversations. It’s time-consuming progress, to be sure. Analysts are buzzing about the merger’s potential to remake the oil and gas sector’s competitive landscape. They caution that a number of things may affect the negotiations’ end result and timing. For context, BP’s current market valuation is just under $85 billion, so the potential deal is on the order of BP’s current total value.
Headquartered in London, BP has for decades been one of the largest companies in the global energy market. The company’s massive footprint covers major segments such as upstream (exploration & production), downstream (refining) and even their budding renewable energy projects. The company has consistently sought to adapt to changing market conditions and regulatory pressures, making it an attractive candidate for acquisition.
Shell, also a major player within the oil and gas industry, has been actively pursuing strategies to expand its portfolio and enhance operational efficiencies. Purchasing BP would provide Shell with increased reach and skills. This strategic shift can greatly expand the level of service they provide and boost their fiscal bottom line.
Market analysts continue to watch the situation as things progress. The proposed merger raises concerns about competitive effects and potential federal antitrust enforcement. It further endangers the public and employees and stakeholders associated with both companies.