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BP shares higher on Exxon's rumored takeover interest

  • A rumor making the rounds today is a purported interest by Exxon Mobil (XOM -0.2%) in a takeover of BP (BP +0.5%).
  • Such gossip is not new, the Telegraph points out; following the 2010 Gulf of Mexico disaster, BP frequent was rumored to be vulnerable to a takeover, with XOM named as a potential predator.
  • As far-fetched as a deal sounds - why would XOM or anyone else want the aggravation? - BP shares are higher in a weak market.
Comments (39)
  • Abigsoxfan
    , contributor
    Comments (610) | Send Message
     
    I've avoided BP like the plague due to their problems and the fear that the government might try to destroy them. Now my oil stock wants to buy them?
    20 Sep 2013, 02:15 PM Reply Like
  • rickmundrane
    , contributor
    Comments (4) | Send Message
     
    yup
    21 Sep 2013, 04:16 AM Reply Like
  • deercreekvols
    , contributor
    Comments (5778) | Send Message
     
    BP has been operating since 1908. They a world wide company and the US is a single piece to their business in North America. Operations are in South America, Africa, Asia, Europe, and Australia.

     

    There is so much more to this company than what goes on in the US. This is the reason I am long BP.
    21 Sep 2013, 12:45 PM Reply Like
  • rjj1960
    , contributor
    Comments (1370) | Send Message
     
    These fake rumors are now fabricated on a daily basis. What a scam.
    20 Sep 2013, 02:18 PM Reply Like
  • Richard0623
    , contributor
    Comments (142) | Send Message
     
    Hard to see that happening, let alone being approved
    20 Sep 2013, 02:19 PM Reply Like
  • Mike Walker
    , contributor
    Comments (334) | Send Message
     
    Face the facts, XOM is unable to halt a decline in production using the drill bit. If you can't find it then the alternative is to buy it.

     

    They would need a major acquisition to move the needle. A BP, a COP, or one of the major independents like APC, EOG, or even a PXD.

     

    Chevron is locking at the same opportunities. Shell needs to do something big or become bait themselves, and its long been rumored that Total will go after ENI.
    20 Sep 2013, 02:21 PM Reply Like
  • Larry Smith
    , contributor
    Comments (2509) | Send Message
     
    XOM's production will be just fine, the next few years will see a number of large projects come online which will increase production.

     

    As for the acquisition not being approved, I see no reason why it wouldn't be. Both companies are far down the list of leading oil producing companies, well behind the various state owned companies. Put the two of them together and they aren't even in the top ten in reserves..

     

    Having said that, I doubt XOM would make such an acquisition, but then again, you never know.
    20 Sep 2013, 02:37 PM Reply Like
  • Mike Walker
    , contributor
    Comments (334) | Send Message
     
    Yes XOM will have a number of large projects come online.

     

    But reservoir depletion is a steady 7% to 9% per year and on a large production base - depletion completely overwhelms any new volumes.
    20 Sep 2013, 04:01 PM Reply Like
  • geologist
    , contributor
    Comments (273) | Send Message
     
    What's the opinion of how the liabilities associated with BP's totally mis-managed Macondo blow-out will be handled. I assume these would become Exxon's liabilities. I only refer to the blowout as being mismanaged due to the short cuts BP took in order to get the well FRR's.

     

    Also, what's the prevailing thoughts on how Exxon's stock price would be impacted if they were to buy out BP. I do agree that the best way for Exxon to acquire reserves is through buyouts and to move the needle (as others have mentioned) the reserves would have to be of size. I also agree that Exxon's upcoming future projects will result in production increases in the next 1-3 years. Regards.
    20 Sep 2013, 03:13 PM Reply Like
  • Bob Carl
    , contributor
    Comments (212) | Send Message
     
    There is a poignant historical tale here. If XOM were to buy BP, it would be completing, in large part, the reassembly of John D. Rockefeller's Standard Oil Company. Remember Exxon is simply the changed name of the old holding company, Standard Oil Company (New Jersey). In 1999 it bought Mobil, which was formerly Standard Oil Company of New York (SOCONY). SOCONY had merged with Vacuum Oil Company, another Standard spinoff in the 1930s.

     

    BP, especially its North American assets is the result of the mergers of the old Anglo-Iranian Oil Company (BP) with AMOCO (Standard Oil of Indiana), SOHIO (Standard Oil of Ohio) and ARCO (Atlantic Richfield, formerly Atlantic Refining Company). These were large subsidiaries of Standard Oil Company (New Jersey) at the time of the 1911 breakup and did rather well as independent companies until being bought by BP.

     

    Beyond history, if XOM were to buy BP, it would be buying BP's excellent acreage in the Gulf of Mexico (a legacy of AMOCO), it would be buying wounded BP at a discount and at a price cheaper than what it could discover and develop reserves for, it would create huge administrative synergies, and XOM's management has demonstrated an ability to handle large-scale mergers well.

     

    Interestingly, were this to happen, only one baby Standard would be left: Chevron (Standard Oil Company of California). Merging that to Exxon would really be something and reverse the 1911 breakup entirely!

     

    However, as noted elsewhere, these rumors have surfaced before and I would not hold my breath! Still, as a holder of both XOM and BP, I would welcome it.
    20 Sep 2013, 03:17 PM Reply Like
  • bigbenorr
    , contributor
    Comments (775) | Send Message
     
    Sounds like the oil deal of the century!
    20 Sep 2013, 04:56 PM Reply Like
  • FreeStateYank
    , contributor
    Comments (803) | Send Message
     
    Thanks, Bob, for sharing the history with SA readers. I knew of some of the Standard Oil history, but not all of it. It would be rather ironic, wouldn't it, to see the gov't approve of what they once ripped asunder?
    21 Sep 2013, 01:08 AM Reply Like
  • chopchop0
    , contributor
    Comments (3547) | Send Message
     
    BP has dug itself into a hole with its mismanagement of the claims fund after the gulf disaster. They've spent nearly all the fund paying off every claim that came through and they will probably need more $$$$ coming.

     

    XOM would be foolhardy to buy up that bag of liabilities.
    20 Sep 2013, 03:23 PM Reply Like
  • bigbenorr
    , contributor
    Comments (775) | Send Message
     
    Maybe XOM's legal department is more aggressive.....
    20 Sep 2013, 06:21 PM Reply Like
  • FreeStateYank
    , contributor
    Comments (803) | Send Message
     
    Part of the problem, iirc, is BP cut a deal w/ the DoJ for less penalties, etc, if they went ahead and started paying out damages... but it appears that the DoJ has at least partially reneged on the deal. Additionally, the DoJ appointed the 'trustee' to administer the payout. BP was only writing the checks. Feinberg, I think is his name. His claim to fame is handling the 9/11 payouts. IMO, Feinberg and his team did a lousy job and didn't make a good faith attempt to weed out bogus or inflated claims...

     

    The irony is BP was trying to act in good faith to help the little guys... and the gov't appointee was so negligent in fiduciary duties, that 'little guys' who are legit might not have money to access and cheats got a bundle... And BP got the shaft.
    21 Sep 2013, 01:12 AM Reply Like
  • RWMostow
    , contributor
    Comments (1442) | Send Message
     
    Chopchop-

     

    What if XOM bot the assets of BP? Leaving BP and empty shell to deal with future claims?

     

    -rwm
    21 Sep 2013, 08:34 AM Reply Like
  • chopchop0
    , contributor
    Comments (3547) | Send Message
     
    I don't see that happening on the watch of the us government. Could be wrong though
    21 Sep 2013, 02:44 PM Reply Like
  • Clayton Rulli
    , contributor
    Comments (2656) | Send Message
     
    If (VZ) can buyout VZ wireless for over 100B, (XOM) can definately buyout (BP)
    20 Sep 2013, 04:39 PM Reply Like
  • Disturber
    , contributor
    Comments (179) | Send Message
     
    If such a transaction were to materialize, it would most likely be a stock for stock deal that valued BP at about $55. It would make terrific sense and would have the total support of the British government because so many of the British pensions are funded by BP dividends. As for the remaining Macondo aftermath, the worst case scenario is really not that frightening and from XOM's standpoint, would allow a change in litigation strategy that would be much tougher and would most likely result in lower payouts. Moreover, the resulting company would be an American company and that would sit well with the Judges and others who are making decisions regarding the BP liabilities. This is a deal that make sense.

     

    I am long BP and have been accumulating. It is a bargain at these prices and will pay off handsomely in the future.

     

    Disturber
    20 Sep 2013, 05:43 PM Reply Like
  • bigbenorr
    , contributor
    Comments (775) | Send Message
     
    Disturber: I fully agree but its probably too good to be true.
    20 Sep 2013, 06:24 PM Reply Like
  • HDPElabtech
    , contributor
    Comments (3) | Send Message
     
    I could see XOM buy a bunch of smalls like Linn Energy but BP, not going to happen even if they wanted to!
    20 Sep 2013, 05:52 PM Reply Like
  • RM13
    , contributor
    Comments (819) | Send Message
     
    Linn Energy, MLP, no. Current undervalued oil and gas assets are in Canada, so look there for deals.
    22 Sep 2013, 12:21 AM Reply Like
  • hoyt15
    , contributor
    Comments (157) | Send Message
     
    I don't think any potential additional liabilities attached to Macondo would scare off Exxon. Remember that in 1989 the Exxon Valdez was the largest ever oil spill, with $Billions in cleanups, fines, legal costs etc., but the initial damages sought were far in excess of what they have paid (I believe it's still being litigated some 25 years later).
    And it would be most likely that there would be a legal firewall set up to protect against unforeseen damages. After XOM's last gassy acquisition has proven to be marginal to this point in time, getting more oil on the cheap would be attractive....they could easily afford BP with the balance sheet they have
    20 Sep 2013, 06:20 PM Reply Like
  • keentolearn
    , contributor
    Comments (129) | Send Message
     
    Both are giant in oil and gas industry and any such rumor is nothing but a potential attention seeking strategy, a way through which such news leaker may remain in buzz all over.
    20 Sep 2013, 07:32 PM Reply Like
  • FreeStateYank
    , contributor
    Comments (803) | Send Message
     
    BP has some really excellent acreage. The talent of that firm appears to be sussing out the geology for great finds. However, from a management perspective, they are weaker... XOM as of late is just the opposite. It would be an interesting deal.

     

    Sold out of BP, but may well take up another position. Interestingly, I think it would also boost XOM's share price, even though many times a company making a large acquisition often sees their share price decrease due to uncertainties in the market about how good a deal the acquiring company was making.
    21 Sep 2013, 01:16 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (8701) | Send Message
     
    Regulatory agencies of multiple countries (plus the EU) would halt a merger of supermajors such as BP and XOM.

     

    Never gonna happen.
    21 Sep 2013, 08:42 AM Reply Like
  • Offering
    , contributor
    Comments (22) | Send Message
     
    BP...Is a screaming buy. With the cash flow it throws off, and the negative impact and perception of the gulf Oil spill. You can't even go down and buy your local landscape or convient store for the ratio BP is selling at. Take a look at Seth Klarman's position in BP. I already own some.
    21 Sep 2013, 09:32 AM Reply Like
  • Chubby Lipshitz
    , contributor
    Comments (312) | Send Message
     
    Why take the risk and buy BP when you could have NBL, APA and APC, (or any other combination of successful E&P companies) all for the price of BP.
    21 Sep 2013, 10:01 AM Reply Like
  • pigeonguy
    , contributor
    Comments (113) | Send Message
     
    BP pays you 5.2% to wait while they get their act together and wrap up Macondo.
    21 Sep 2013, 03:36 PM Reply Like
  • chopchop0
    , contributor
    Comments (3547) | Send Message
     
    Assuming the us government and greedy gulf lawyers don't simultaneously drain off enough cash flow to hit that dividend
    21 Sep 2013, 05:33 PM Reply Like
  • charliezap
    , contributor
    Comments (1397) | Send Message
     
    There is absolutely no way Exxon-BP could happen. The DOJ finally drew the line wrt the American-USAir merger. This one is even more obvious. Just wish I knew how anyone could take a rumor like this one seriously.
    21 Sep 2013, 09:45 PM Reply Like
  • Chubby Lipshitz
    , contributor
    Comments (312) | Send Message
     
    It's the triumph of hope over experience and common sense
    22 Sep 2013, 07:37 AM Reply Like
  • Larry Smith
    , contributor
    Comments (2509) | Send Message
     
    I will repeat what I said before, I see no reason why this merger (which I doubt will happen) would be blocked. The oil world is completely different today than it was back when Standard Oil controlled 90% of the business. The state owned companies are now the largest producers and countries with oil no longer are interested in production sharing agreements, preferring a fee for barrel agreement. Thus, a merged XOM and BP would still control a minor amount of the worlds oil. I believe a XOM BP merger would be approved with the combined company having to sell off some refining assets.
    22 Sep 2013, 08:20 AM Reply Like
  • charliezap
    , contributor
    Comments (1397) | Send Message
     
    Larry, and I will repeat my statement that Exxon-BP will never happen. There are other reasons than antitrust, especially cultural, political, and risk avoidance.
    23 Sep 2013, 04:36 PM Reply Like
  • Larry Smith
    , contributor
    Comments (2509) | Send Message
     
    I agree that cultural differences, political issues and risk avoidance are huge obstacles to a merger, especially the cultural differences. I don't think they will merge, my only point was that there should not be any anti-trust concerns.

     

    Thanks

     

    Larry
    24 Sep 2013, 09:05 AM Reply Like
  • treyminator
    , contributor
    Comments (85) | Send Message
     
    I've read all of the comments about the rumored BP buyout. I did not see anyone discuss the issues relating to BP's broken relationship with the Russian Government and Russian Oil Companies (which are really one and the same). BP was forced out of a significant oil deal with one of the major Russian oil companies (forgive me but I don't recall which company and don't have time now to research it). With XOM doing a major deal recently with Rosneft, how in the world is XOM going to buy BP given its recent broken relationships with Russia? Answer: XOM cannot buy BP given its interest in maintaining good relationship with its Russian partners. XOM would be far better off buying EOG (or CLR) right now. A few years down the road, XOM could buy CLR (or EOG). Alternatively, XOM could buy COP although this will no doubt bring more scrutiny from DOJ and Congress. Bottom-line is XOM will not buy BP. I f it buys anything, XOM should look to do a major oil deal in North America to avoid political risks associated with foreign oil deals.
    23 Sep 2013, 03:38 PM Reply Like
  • bigbenorr
    , contributor
    Comments (775) | Send Message
     
    BP owns 20% of Rosneft now.....
    23 Sep 2013, 05:34 PM Reply Like
  • treyminator
    , contributor
    Comments (85) | Send Message
     
    It may be BP owns 20% of Rosneft but wasn't BP in charge of developing a major oil field with another Russian oil company and the government got involved and forced BP out of a major position (i.e. forced buy-out)?
    24 Sep 2013, 03:49 PM Reply Like
  • bigbenorr
    , contributor
    Comments (775) | Send Message
     
    I thought that was for Rosneft. i would assume now they will partner on stuff
    24 Sep 2013, 04:24 PM Reply Like
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