LONDON: British oil major BP’s shares jumped on Tuesday following reports that its rival, Shell, is exploring a possible acquisition of the oil and gas giant.
Shares rose as much as 2.5 per cent in early trading after it was reported that Shell has been weighing the merits of a takeover with advisers in recent weeks, reported PA Media/dpa news.
BP’s stock has slumped following a period of massive investment in renewable energy which failed to deliver enough profits to please investors.
In February, it revealed a new growth strategy focused on extracting more oil and gas after pressure from some investors to boost profits at the firm.
At the time, bosses said the business went “too far, too fast” on green energy and confirmed plans to heavily reduce spending on renewables.
It is also facing pressure from influential US hedge fund Elliott Management, which took a nearly £4 billion (US$5.3 billion) stake in the company – just under 5 per cent of its shares – earlier this year.
The move is understood to have been aimed at pushing BP back towards fossil fuels to boost profit.
In April, chief executive Murray Auchincloss said the company has been making progress with the strategy despite wider economic uncertainty.
But it has done little to arrest the slide in BP’s share price, which is down about one-third compared with the same point last year.
BP’s market capitalisation is about £56.5 billion based on its current shares, compared with Shell’s £146.7 billion.
A merger would be among the largest in the oil industry’s history, and would end decades of speculation over a possible deal between two of the United Kingdom’s biggest companies.
A Shell spokesman said: “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.”
Shell shares were down 1.35 per cent on Tuesday morning. BP has been approached for comment.
