Shell evaluates potential bp acquisition amid energy sector shifts

Shell is reportedly assessing the feasibility of acquiring its British rival bp, according to a Bloomberg report citing sources familiar with the matter. While discussions are in preliminary stages, Shell is working with advisers to evaluate the merits of such a deal, potentially positioning itself as a dominant force in the global energy sector.

The evaluation comes as Shell's market capitalisation has grown to approximately £149 billion, nearly double that of bp. However, Shell is reportedly waiting for further declines in bp's stock and oil prices before making a decision. Shell's CEO, Wael Sawan, has expressed a preference for continuing share buybacks over pursuing a major acquisition. In a recent interview with The Financial Times, Sawan stated that buying back Shell shares remains the better strategic choice, aligning with the company's recent $3.5 billion share buyback program.

A merger between Shell and bp would significantly bolster Shell’s global energy presence, potentially rivaling giants like Exxon and Chevron. However, such a deal could attract regulatory scrutiny due to its scale. Shell may also wait for bp to initiate contact or for another bidder to emerge before proceeding.

Meanwhile, bp is undergoing restructuring under CEO Murray Auchincloss, who plans to sell $20 billion in assets by 2027 and implement spending cuts. Activist investor Elliott Investment Management has increased its stake in bp to over 5%, pressuring the company for more aggressive cost reductions and asset sales.

Both Shell and bp have declined to comment in detail on the potential deal.