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BP Rallies on Possibilities of a Takeover by ExxonMobil
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Shares of BP plc (BP - Free Report) rallied after a London-based newspaper claimed that ExxonMobil Corporation (XOM - Free Report) is looking to place a takeover bid for the British energy group.
A bid for BP cannot be ignored as these rumors about ExxonMobil’s interest have been doing the rounds for years. However, analysts believe that such a deal is unlikely as it does not seem to be astrategic fit.
The merger would create a company too big and complex to be managed. The weak oil price environment has resulted in just one big deal - Royal Dutch Shell plc’s $54 billion purchase of BG Group Plc in 2016. Other key oil players in the industry have embarked on smaller acquisitions as they intend to preserve cash and maintain their balance sheets. Though oil prices have increased from the 12-year lows of last year, companies are still uncertain if the recovery is sustainable.
Texas-based ExxonMobil has one of the strongest balance sheets in the industry. The company hasn’t signed any major deal since the wave of oil-major consolidation in the late 1990s. In contrast, BP’s market capitalization has decreased considerably since 2010 oil spill in the U.S. Gulf of Mexico forced it to reserve over $54 billion for compensation and penalties.
In 2010, though BP had the same market capitalization as Royal Dutch Shell, its production was much higher when compared to the latter. Today, BP’s value of $112 billion is almost half that of Royal Dutch Shell. It’s even further behind ExxonMobil, the world’s most valuable oil company worth $337 billion.
In the months following the accident, BP’s CEO has divested about 33.33% of the company’s assets and production dropped to a little over 3 million from close to 4 million barrels a day in 2010. The company is trying to rebound, with a series of deals in the Middle East and Africa last year.
On the other hand, ExxonMobil has almost no debt and has also repurchased billions of dollars of shares over the past 10 years. It has a strong balance sheet which empowers the company to make any conceivable transaction. However, the merger of ExxonMobil’s personnel with BP’s internal culture could be challenging. Moreover, the acquisition of BP does not make sense because there is nothing unique about BP that ExxonMobil cannot get something similar by simply acquiring single assets. The combination of these companies could also attract the attention of antitrust regulators worldwide.
Shares of the company have outperformed the Zacks categorized Oil & Gas-International Integrated industry in the last three months. During the period, BP’s shares lost 5%, while the broader industry declined 5.1%. BP carries a Zacks Rank #3 (Hold). Another better-ranked player in the same space include Pioneer Natural Resources Company (PXD - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Pioneer Natural Resources posted a positive earnings surprise of 63.33% in the preceding quarter. It had an average positive earnings surprise of 21.86% in the four trailing quarters.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
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BP Rallies on Possibilities of a Takeover by ExxonMobil
Shares of BP plc (BP - Free Report) rallied after a London-based newspaper claimed that ExxonMobil Corporation (XOM - Free Report) is looking to place a takeover bid for the British energy group.
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A bid for BP cannot be ignored as these rumors about ExxonMobil’s interest have been doing the rounds for years. However, analysts believe that such a deal is unlikely as it does not seem to be astrategic fit.
The merger would create a company too big and complex to be managed. The weak oil price environment has resulted in just one big deal - Royal Dutch Shell plc’s $54 billion purchase of BG Group Plc in 2016. Other key oil players in the industry have embarked on smaller acquisitions as they intend to preserve cash and maintain their balance sheets. Though oil prices have increased from the 12-year lows of last year, companies are still uncertain if the recovery is sustainable.
Texas-based ExxonMobil has one of the strongest balance sheets in the industry. The company hasn’t signed any major deal since the wave of oil-major consolidation in the late 1990s. In contrast, BP’s market capitalization has decreased considerably since 2010 oil spill in the U.S. Gulf of Mexico forced it to reserve over $54 billion for compensation and penalties.
In 2010, though BP had the same market capitalization as Royal Dutch Shell, its production was much higher when compared to the latter. Today, BP’s value of $112 billion is almost half that of Royal Dutch Shell. It’s even further behind ExxonMobil, the world’s most valuable oil company worth $337 billion.
In the months following the accident, BP’s CEO has divested about 33.33% of the company’s assets and production dropped to a little over 3 million from close to 4 million barrels a day in 2010. The company is trying to rebound, with a series of deals in the Middle East and Africa last year.
On the other hand, ExxonMobil has almost no debt and has also repurchased billions of dollars of shares over the past 10 years. It has a strong balance sheet which empowers the company to make any conceivable transaction. However, the merger of ExxonMobil’s personnel with BP’s internal culture could be challenging. Moreover, the acquisition of BP does not make sense because there is nothing unique about BP that ExxonMobil cannot get something similar by simply acquiring single assets. The combination of these companies could also attract the attention of antitrust regulators worldwide.
Shares of the company have outperformed the Zacks categorized Oil & Gas-International Integrated industry in the last three months. During the period, BP’s shares lost 5%, while the broader industry declined 5.1%.
BP carries a Zacks Rank #3 (Hold). Another better-ranked player in the same space include Pioneer Natural Resources Company (PXD - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Pioneer Natural Resources posted a positive earnings surprise of 63.33% in the preceding quarter. It had an average positive earnings surprise of 21.86% in the four trailing quarters.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>