Loading...
See More

BP surges after report of Shell bid

Jan 04 2011 12:38 Reuters

Related Articles

Hayward defends sailing during oil spill

BP and partner 'ignored' cement flaws

BP CEO slams media, rivals

BP sells off regional marketing operations

BP says no asset sales in SA

Obama sues BP, others over spill

 

London - Shares in oil major BP hit a six-month high on Tuesday, after The Daily Mail newspaper reported rival Royal Dutch Shell  had considered a takeover bid during the Gulf of Mexico oil spill.

BP shares were up 5% to 488.85 pence in morning trade.

The paper, citing sources close to the Anglo-Dutch group, reported that Shell weighed an opportunistic bid for BP as crude gushed into the Gulf, but was discouraged by the potentially uncapped legal liabilities.

The newspaper said Shell could yet bid for BP if another suitor emerged, but Europe's largest oil company by market value was unlikely to be the "first mover".

Mic Mills, head of electronic trading at ETX Capital, said BP was also being boosted by comments late on December 31 from the lawyer running BP's Gulf oil spill compensation fund that suggested damages payments could be half the expected level.

Ken Feinberg told Bloomberg Television about half the $20bn set up by BP should be adequate to cover claims for economic losses.

One dealer said the news reports focused minds on the fact that BP shares were cheap compared to rivals. "BP remains cheap and vulnerable at these levels but I do not think a bid is likely."

BP shares trade on a price-earnings ratio of 6.5 times, consensus 2011 earnings, while Shell trades at 8.9 times, partly reflecting that BP's actual earnings could be far lower if it was found to have been grossly negligent in causing the oil spill which would boost legal costs and fines.

However, Feinberg's comment highlighted how the picture could also be brighter than the company has predicted.

Analysts and industry sources said during the crisis last year it was likely that both US oil giant Exxon Mobil and Shell - the only companies considered large enough to mount a bid - would run the slide-rule over BP.

However, the two notoriously conservative companies were seen as likely to be discouraged by the open-ended nature of BP's liabilities.

Now that BP's shares have rebounded 65% from their June low at 296 pence to give BP a market value of around $140bn, a bid would be much harder to mount, especially for Shell which is worth over $210bn.

Exxon has a market value of almost $370bn.

It is uncertain whether regulators on either side of the Atlantic would support a tie-up in the top tier of the industry.

Shell stock traded up 0.8%, against a 2.1% rise in the STOXX Europe 600 Oil and Gas index which was lifted by crude prices which hovered near a 27-month high.

bp  |  shell
NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Company Snapshot

We're talking about:

Small Business

Retailers of any shape and size can now unlock the power of mobile transacting.
 

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...