BP’s shares surged dramatically on June 25, 2025, amid reports that Shell is engaged in early-stage talks to acquire the British oil giant. The news, first reported by The Wall Street Journal, sent BP’s stock soaring as much as 9.3% in the U.S. market, briefly lifting the company’s market valuation to nearly $85 billion. While the discussions remain preliminary and no deal has been confirmed, the mere possibility of a merger between two of the UK’s largest energy firms has ignited fresh investor enthusiasm and speculation about a major shakeup in the global energy sector.
Despite the buzz, Shell swiftly denied that any acquisition talks were underway. A spokesperson told Investing.com, "This is further market speculation. No talks are taking place." This denial echoed previous statements by Shell’s CEO Wael Sawan, who has emphasized the company’s focus on internal performance rather than growth through large acquisitions. During Shell’s first-quarter earnings call, Sawan remarked, "I have said in the past that we want to be value hunters. Today, value hunting – in my view – is buying back more Shell." Nonetheless, the stock market’s reaction to the reports suggests that investors remain intrigued by the potential synergies and scale advantages such a deal could bring.
BP’s recent struggles have made it a potential acquisition target. Over the past year, BP has consistently underperformed its peers, including Shell and major U.S. oil companies like ExxonMobil and Chevron. Analysts attribute BP’s vulnerability to several factors: a slower transition to renewable energy compared to rivals, leadership changes, and weaker financial results. The company’s pivot to renewables, announced in 2020, initially left it lagging when global oil and gas prices surged, and despite a strategic reversal under new CEO Murray Auchincloss, BP shares have continued to underperform in 2025.
Adding complexity to BP’s appeal as a takeover target is its significant debt profile. While the company reports a net debt of $27 billion, further disclosures reveal an additional $38 billion in liabilities, including $17 billion in hybrid bonds, $12.5 billion in lease obligations, and an $8 billion remaining liability from the 2010 Macondo oil spill, one of the worst environmental disasters in recent history. RBC analysts have described BP’s "all-in debt profile" as a "poisoned chalice" for any potential acquirer, making a takeover more challenging despite BP’s seemingly attractive market valuation.
Shell, on the other hand, maintains a stronger balance sheet and has repeatedly expressed a preference for share buybacks over acquisitions. UBS analyst Joshua Stone noted that although BP’s stock price may appear inexpensive, its enterprise value to debt-adjusted cash flow ratio (EV/DACF) is largely in line with Shell’s, reflecting the hidden costs embedded in BP’s liabilities. Henry Tarr, co-head of energy and environment research at Berenberg, added, "It is likely that no deal will be agreed due to BP carrying significantly more debt than Shell. This leverage eats into its free cash flow generation." However, BP’s valuation could improve if it successfully completes its $20 billion asset disposal plan by 2026.
The potential merger, if it materializes, would be one of the largest energy deals in recent history — possibly surpassing the $83 billion Exxon-Mobil megamerger from the early 2000s. The combined entity would produce nearly 5 million barrels of oil equivalent per day and could dominate the liquefied natural gas market in Europe and beyond. Such consolidation would dramatically reshape the competitive landscape, positioning the merged company to rival U.S. giants like ExxonMobil and Chevron.
However, analysts caution that the deal would come with significant challenges. The acquisition would likely require a premium of around 20% over BP’s current valuation, making it an expensive proposition. Additionally, antitrust concerns could arise, particularly in fuel retail markets where both companies have a strong presence. The geopolitical backdrop adds further uncertainty: recent tensions in the Middle East and Iraq’s plans to increase oil production to 7 million barrels per day by 2027 have already injected volatility into global oil markets, which could influence merger dynamics.
Investor reactions have been mixed across markets. In the U.S., BP shares on the NYSE jumped over 4.6% to $31.20, with trading volumes exceeding 45 million shares on the day of the report. The stock price fluctuated between $29.58 and $32.85, reflecting strong investor interest. Conversely, in London, BP’s shares on the London Stock Exchange closed slightly lower by 0.97% at 364.40 GBX, signaling a more cautious stance among UK investors amid broader market pressures. BP’s market capitalization in the UK stands at about £56.8 billion, with a 52-week trading range between 329 and 493 GBX, while Shell’s market cap hovers around $220 billion.
Shell’s official stance remains firm: the company is focused on performance, discipline, and simplification rather than expansion through acquisitions. A Shell spokesperson reiterated, "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." This approach is consistent with the company’s recent financial strategy, which prioritizes share repurchases over costly mergers.
Meanwhile, BP declined to comment on the takeover talks. The company continues to grapple with its strategic direction and financial health, including managing its legacy liabilities from the Macondo spill and adapting to evolving energy market demands.
Should the talks progress, the deal would mark a significant moment in the ongoing consolidation trend within the oil and gas sector, driven by rising costs, climate change pressures, and shifting investor expectations. For shareholders, such a merger could mean short-term value gains and a transformed competitive environment in the long run. Yet, the considerable debt burden and regulatory hurdles suggest that any agreement, if reached, will be complex and hard-fought.
As the energy industry navigates a volatile and uncertain landscape, the prospect of a Shell-BP merger underscores the strategic recalibrations underway among Europe’s energy giants. Whether this early-stage discussion evolves into a landmark deal remains to be seen, but the market’s swift reaction demonstrates the high stakes and keen interest surrounding these developments.
