Shares of BP jumped more than 10% on Wednesday following a report that Shell was in early-stage talks to acquire the British energy giant, only to retreat sharply after Shell denied any such negotiations were taking place. The stock spiked to a session high of $32.94 before settling about 2% higher by midday.
The Wall Street Journal reported Shell was exploring a potential acquisition of BP, citing people familiar with the matter. A deal would mark one of the largest mergers in the energy sector since Exxon's $83 billion acquisition of Mobil in the late 1990s, according to Andrew Dittmar, mergers and acquisitions analyst at Enverus Intelligence Research. BP currently has a market capitalization of roughly $80 billion.
Shell quickly pushed back. "This is further market speculation. No talks are taking place," a Shell spokesperson told CNBC. "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."
BP declined to comment on the reports.
The speculation comes as BP faces mounting pressure from shareholders and activist hedge fund Elliott Management, which disclosed a stake of over 5% in April. Analysts have viewed BP as a potential takeover candidate following years of underperformance relative to peers and an unstable strategic vision.
BP embarked on a green transformation in 2020 under then-CEO Bernard Looney, pledging deep emissions cuts and reduced oil output. But the move failed to deliver investor confidence, particularly after the Russia-Ukraine war reignited global demand for fossil fuels. Looney later scaled back the company's green ambitions before being ousted by the board for failing to disclose personal relationships with colleagues.
His successor, Murray Auchincloss, has reversed course, announcing plans to cut more than £4 billion in low-carbon spending while expanding BP's oil and gas output. The pivot has angered environmental groups and done little to satisfy investors. Auchincloss has also warned of job cuts affecting 5% of BP's global workforce.
BP has lost nearly a third of its market value in the past year, currently trading around £58 billion. Meanwhile, Shell, with a market capitalization of over £150 billion, has benefited from a strong oil and gas rebound and investor-friendly strategies under CEO Wael Sawan.
Sawan denied acquisition interest earlier this year, stating, "Right now, buying back Shell [shares] for us continues to be absolutely the right alternative to go for," according to the Financial Times.
