Shell's Potential BP Buy: Strategic Scale or a Risky Gamble?
In the wake of blockbuster energy deals like ExxonMobil 's XOM acquisition of Pioneer Natural Resources and Chevron 's CVX pending merger with Hess, speculation around Europe's largest oil company Shell 's SHEL interest in acquiring smaller rival BP BP has stirred fresh debate. If consummated, a Shell-BP tie-up would reshape the global oil and gas landscape, creating a European supermajor with the scale to rival ExxonMobil and outsize Chevron.
However, despite media reports that Shell has been exploring such a deal with advisors, CEO Wael Sawan has reiterated that the bar for mergers and acquisitions remains 'very high.' Speaking at Shell's recent annual general meeting, where he won 98.7% shareholder support, Sawan emphasized that Shell's current share price makes buybacks a more compelling use of capital. Chair Andrew Mackenzie echoed the sentiment.
Nevertheless, here's a closer look at both sides of the potential transaction.
Scale Advantage and Competitive Positioning: If Shell acquires BP, the combined company would surpass Chevron in market capitalization and close the gap with ExxonMobil, forming the world's second-largest publicly traded energy firm. Such scale could strengthen Shell's leverage in procurement, logistics and technology partnerships. In a world where ExxonMobil and Chevron continue to grow via large-scale acquisitions (e.g., ExxonMobil's Pioneer and Chevron's anticipated Hess deals), Shell's move could be seen as a strategic response to regain influence and secure long-term competitiveness in both upstream and LNG operations.
Synergy Potential and Cost Optimization: The merger presents real synergy potential. Shell and BP have overlapping assets in the Gulf of Mexico and the Ruwais LNG project. Rationalizing such positions could lead to operational efficiencies and cost reductions. Moreover, divesting redundant downstream assets could unlock capital for reinvestment in Shell's LNG growth. Administrative and R&D overlaps, if streamlined effectively, may result in meaningful savings, improving return on capital over time and partially cushioning the debt required to fund the deal.
BP's Financial Strain Could Burden Shell: Despite potential synergies, BP's finances remain a concern. In the first quarter of 2025, Shell earned $4.8 billion, with a high-single-digit profit margin on $70 billion in revenues, while BP generated only $684 million in adjusted net income at a low-single-digit margin. Worse, BP's $53.8 billion in long-term debt equals over 70% of its current market cap. Shell, by contrast, carries $65.1 billion in debt, just 30% more than its valuation. Taking on BP could dilute Shell's superior performance, especially in LNG, which is a key profit engine.
Integration Risk and Weak Reserve Profiles: Both companies face upstream reserve challenges. Shell holds about 9.6 billion barrels of oil equivalent, while BP lags with just 3.7 billion. These limited reserves don't compare favorably with ExxonMobil or Chevron. A merger might simply combine short-lived portfolios without addressing the structural deficit. Additionally, BP's strategic shifts—from renewables back to hydrocarbons—may create friction when aligning with Shell's longer-term plans, risking inefficient capital deployment and integration setbacks.
Conclusion:
While the Shell-BP merger could deliver scale, synergies, and short-term excitement, the strategic downsides are hard to ignore. Shell risks diluting its financial strength by absorbing a weaker peer. The potential for cost savings exists, but integration complexity and balance sheet strain may cap long-term returns. Shell's management has signaled a preference for share buybacks, suggesting that the deal may not materialize. For now, Shell remains a Zacks Rank #3 (Hold) company on its own merits. BP stays a Zacks Rank #5 (Strong Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
BP p.l.c. (BP): Free Stock Analysis Report
Chevron Corporation (CVX): Free Stock Analysis Report
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL): Free Stock Analysis Report
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CTV News
4 hours ago
- CTV News
Can an American pope apply U.S.-style fundraising and standards to fix troubled Vatican finances?
A view of the empty St. Peter's Square as Pope Francis is delivering the Angelus noon prayer from his studio, at the Vatican, Jan. 6, 2021. (AP Photo/Andrew Medichini, File) VATICAN CITY — As a bishop in Peru, Robert Prevost was often on the lookout for used cars that he could buy cheap and fix up himself for use in parishes around his diocese. With cars that were really broken down, he'd watch YouTube videos to learn how to fix them. That kind of make-do-with-less, fix-it-yourself mentality could serve Pope Leo XIV well as he addresses one of the greatest challenges facing him as pope: The Holy See's chronic, 50 million to 60 million euro (US$57-68 million) structural deficit, one billion euro ($1.14 billion) pension fund shortfall and declining donations that together pose something of an existential threat to the central government of the 1.4-billion strong Catholic Church. As a Chicago-born math major, canon lawyer and two-time superior of his global Augustinian religious order, the 69-year-old pope presumably can read a balance sheet and make sense of the Vatican's complicated finances, which have long been mired in scandal. Whether he can change the financial culture of the Holy See, consolidate reforms Pope Francis started and convince donors that their money is going to good use is another matter. Leo already has one thing going for him: his American-ness. U.S. donors have long been the economic life support system of the Holy See, financing everything from papal charity projects abroad to restorations of St. Peter's Basilica at home. Leo's election as the first American pope has sent a jolt of excitement through U.S. Catholics, some of whom had soured on donating to the Vatican after years of unrelenting stories of mismanagement, corruption and scandal, according to interviews with top Catholic fundraisers, philanthropists and church management experts. 'I think the election of an American is going to give greater confidence that any money given is going to be cared for by American principles, especially of stewardship and transparency,' said the Rev. Roger Landry, director of the Vatican's main missionary fundraising operation in the U.S., the Pontifical Mission Societies. 'So there will be great hope that American generosity is first going to be appreciated and then secondly is going to be well handled,' he said. 'That hasn't always been the circumstance, especially lately.' Reforms and unfinished business Pope Francis was elected in 2013 on a mandate to reform the Vatican's opaque finances and made progress during his 12-year pontificate, mostly on the regulatory front. With help from the late Australian Cardinal George Pell, Francis created an economy ministry and council made up of clergy and lay experts to supervise Vatican finances, and he wrestled the Italian-dominated bureaucracy into conforming to international accounting and budgetary standards. He authorized a landmark, if deeply problematic, corruption trial over a botched London property investment that convicted a once-powerful Italian cardinal. And he punished the Vatican's Secretariat of State that had allowed the London deal to go through by stripping it of its ability to manage its own assets. But Francis left unfinished business and his overall record, at least according to some in the donor community, is less than positive. Critics cite Pell's frustrated reform efforts and the firing of the Holy See's first-ever auditor general, who says he was ousted because he had uncovered too much financial wrongdoing. Despite imposing years of belt-tightening and hiring freezes, Francis left the Vatican in somewhat dire financial straits: The main stopgap bucket of money that funds budgetary shortfalls, known as the Peter's Pence, is nearly exhausted, officials say. The 1 billion euro ($1.14 billion) pension fund shortfall that Pell warned about a decade ago remains unaddressed, though Francis had planned reforms. And the structural deficit continues, with the Holy See logging an 83.5 million euro ($95 million) deficit in 2023, according to its latest financial report. As Francis' health worsened, there were signs that his efforts to reform the Vatican's medieval financial culture hadn't really stuck, either. The very same Secretariat of State that Francis had punished for losing tens of millions of euros in the scandalous London property deal somehow ended up heading up a new papal fundraising commission that was announced while Francis was in the hospital. According to its founding charter and statutes, the commission is led by the Secretariat of State's assessor, is composed entirely of Italian Vatican officials with no professional fundraising expertise and has no required external financial oversight. To some Vatican watchers, the commission smacks of the Italian-led Secretariat of State taking advantage of a sick pope to announce a new flow of unchecked donations into its coffers after its 600 million euro ($684 million) sovereign wealth fund was taken away and given to another office to manage as punishment for the London fiasco. 'There are no Americans on the commission. I think it would be good if there were representatives of Europe and Asia and Africa and the United States on the commission,' said Ward Fitzgerald, president of the U.S.-based Papal Foundation. It is made up of wealthy American Catholics that since 1990 has provided over $250 million (219 million euros) in grants and scholarships to the pope's global charitable initiatives. Fitzgerald, who spent his career in real estate private equity, said American donors — especially the younger generation — expect transparency and accountability from recipients of their money, and know they can find non-Vatican Catholic charities that meet those expectations. 'We would expect transparency before we would start to solve the problem,' he said. That said, Fitzgerald said he hadn't seen any significant let-up in donor willingness to fund the Papal Foundation's project-specific donations during the Francis pontificate. Indeed, U.S. donations to the Vatican overall have remained more or less consistent even as other countries' offerings declined, with U.S. bishops and individual Catholics contributing more than any other country in the two main channels to donate to papal causes. A head for numbers and background fundraising Francis moved Prevost to take over the diocese of Chiclayo, Peru, in 2014. Residents and fellow priests say he consistently rallied funds, food and other life-saving goods for the neediest — experience that suggests he knows well how to raise money when times are tight and how to spend wisely. He bolstered the local Caritas charity in Chiclayo, with parishes creating food banks that worked with local businesses to distribute donated food, said the Rev. Fidel Purisaca Vigil, a diocesan spokesperson. In 2019, Prevost inaugurated a shelter on the outskirts of Chiclayo, Villa San Vicente de Paul, to house desperate Venezuelan migrants who had fled their country's economic crisis. The migrants remember him still, not only for helping give them and their children shelter, but for bringing live chickens obtained from a donor. During the COVID-19 pandemic, Prevost launched a campaign to raise funds to build two oxygen plants to provide hard-hit residents with life-saving oxygen. In 2023, when massive rains flooded the region, he personally brought food to the flood-struck zone. Within hours of his May 8 election, videos went viral on social media of Prevost, wearing rubber boots and standing in a flooded street, pitching a solidarity campaign, 'Peru Give a Hand,' to raise money for flood victims. The Rev. Jorge Millán, who lived with Prevost and eight other priests for nearly a decade in Chiclayo, said he had a 'mathematical' mentality and knew how to get the job done. Prevost would always be on the lookout for used cars to buy for use around the diocese, Millán said, noting that the bishop often had to drive long distances to reach all of his flock or get to Lima, the capital. Prevost liked to fix them up himself, and if he didn't know what to do, 'he'd look up solutions on YouTube and very often he'd find them,' Millán told The Associated Press. Before going to Peru, Prevost served two terms as prior general, or superior, of the global Augustinian order. While the order's local provinces are financially independent, Prevost was responsible for reviewing their balance sheets and oversaw the budgeting and investment strategy of the order's headquarters in Rome, said the Rev. Franz Klein, the order's Rome-based economist who worked with Prevost. The Augustinian campus sits on prime real estate just outside St. Peter's Square and supplements revenue by renting out its picturesque terrace to media organizations (including the AP) for major Vatican events, including the conclave that elected Leo pope. But even Prevost saw the need for better fundraising, especially to help out poorer provinces. Toward the end of his 12-year term and with his support, a committee proposed creation of a foundation, Augustinians in the World. At the end of 2023, it had 994,000 euros ($1.13 million) in assets and was helping fund self-sustaining projects across Africa, including a center to rehabilitate former child soldiers in Congo. 'He has a very good interest and also a very good feeling for numbers,' Klein said. 'I have no worry about the finances of the Vatican in these years because he is very, very clever.' Franklin Briceño contributed from Lima, Peru. Associated Press religion coverage receives support through the AP's collaboration with The Conversation US, with funding from Lilly Endowment Inc. The AP is solely responsible for this content. Nicole Winfield, The Associated Press
Globe and Mail
5 hours ago
- Globe and Mail
AB Anywhere: $AB Goes Live on Binance, Ushering in a New Era of Cross-Chain Asset Mobility
DUBLIN , June 7, 2025 /CNW/ -- On June 7, 2025 at 14:00 (UTC+8), AB DAO announced that its native token $AB is now officially trading on Binance Alpha— Binance 's early-access, exclusive listing platform. As a high-performance, modular heterogeneous blockchain network, the AB Core mainnet has been fully deployed, and—through the AB IoT sidechain and AB Connect cross-chain protocol—multi-chain interoperability is enabled; AB Wallet now supports BSC - AB cross-chain transactions and multi-asset management; the AB Foundation has launched global philanthropic projects, leveraging on-chain transparent donations and community governance to advance decentralized charity. This listing on Binance Alpha will offer global users more convenient and efficient asset mobility and participation opportunities. Trading Highlights $AB Live on Binance Alpha: Global users can deposit and trade $AB immediately, enjoying premium liquidity. Airdrop Event: Eligible Binance users can claim 9,882 AB tokens on the Alpha Events page. Trading Competition: Coming soon, with a prize pool of 115,000,000 $AB. Details: See the official Binance announcement: This listing will significantly enhance $AB's market depth and liquidity, and by leveraging Binance 's custody and risk-management framework, users will enjoy major improvements in security and trading experience. About AB AB is a high-performance, modular heterogeneous blockchain network whose native token $AB is deployed across chains via AB Connect, realizing the "AB Anywhere" vision. AB is dedicated to driving stablecoin issuance, building payment-network infrastructure, and facilitating decentralized philanthropy, thereby constructing an open, trusted global value infrastructure.
CTV News
16 hours ago
- CTV News
Bill 69: Quebec government invokes closure to pass energy bill
Energy Minister Christine Fréchette during question period at the National Assembly on June 5, 2025. (Jacques Boissinot/The Canadian Press) The government's patience has reached its limit: it is invoking a gag order to force the rapid adoption of Bill 69 on energy. For several days now, the government has been laying the groundwork for the adoption, invoking closure for the bill, which aims to give Hydro-Québec free rein to increase its electricity production. Investments of nearly $200 billion are planned between now and 2035. Energy Minister Christine Fréchette argued that its rapid adoption will save $6 billion on the wind energy strategy, estimated at $30 billion. Premier François Legault has promised the creation of 'good jobs' if the bill is passed before the summer. However, the opposition parties are highly critical of the bill, considering it poorly drafted. The PQ and Québec Solidarity have even called for its outright withdrawal. Two weeks ago, Minister Fréchette tabled 52 amendments to modify her bill. The government accuses the opposition of obstructing the legislative process. Gagging is 'a parliamentary procedure used by the government to limit the time spent debating a motion or bill and to speed up its adoption,' according to the National Assembly website. The bill also aims to fulfil the government's promise to limit residential electricity rate increases to a maximum of 3 per cent. It will also allow a private company to sell its electricity to another and aims to simplify partnerships with Indigenous communities. Bill 69 was introduced in June 2024 by Super Minister Pierre Fitzgibbon, before he resigned a few months later. Minister Christine Fréchette took over, but the legislative process for the bill has been an arduous one. In December 2024, the minister cited Donald Trump and his threats of tariffs to justify the delays in moving the bill forward. Last February, the official Liberal opposition delayed consideration of the bill, also citing the American president. This report by The Canadian Press was first published in French on June 6, 2025. By Thomas Laberge, The Canadian Press
