From the magazine Martin Vander Weyer

If the numbers add up, Shell should bid for BP

Martin Vander Weyer Martin Vander Weyer
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EXPLORE THE ISSUE 10 May 2025
issue 10 May 2025

A hangar full of analysts and investment bankers must have spent the long weekend formulating advice for Shell chief executive Wael Sawan for and against a takeover of BP. On the plus side, Shell’s strong share performance, reflecting its undiluted focus on oil and gas and boosting its market value to £150 billion, makes a bid look almost bite-sized – BP’s value having shrunk to £56 billion over the past two years as investors decried the commitment to renewables that its board has belatedly reversed. And the addition of BP’s assets in North America and the Gulf of Mexico would turn Shell into a carbon-fuel giant to challenge the likes of Exxon and Chevron in the US.

But the ‘execution risks’ – including the crunching together of two vast management hierarchies – would be formidable. BP itself arguably offers a cautionary tale from the John Browne era a generation ago, with its aftermath of safety issues and internal strife, of the hubris of excessive ambition. And by the time Shell-BP is fully bedded down, several years hence, fickle investment fashion may well have swung back to wind and solar.

Does that mean Sawan is right to stick to Shell’s policy of buying back tranches of its own shares (as it has done steadily since 2022) as a safer method of ‘value-hunting’ on behalf of shareholders and share-rewarded executives? I say no: this column has been a consistent critic of buybacks that divert capital from operational and technological advance, ‘as a peril of the age: a contributing factor in the slump of productivity, the slowdown of growth… and the spread of cynicism towards big-corporate capitalism’.

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