There’s an old saying: “If a takeover rumour won’t die, it probably has a reason to live.” The idea of Shell (LSE: SHEL) snapping up BP (LSE: BP) is one such rumour, that has been circling the oil industry’s rumour mill. But when the Wall Street Journal reported today that Shell and BP were in early-stage discussions, markets paid attention. BP’s US-listed shares surged 10% before trimming gains. Shell dipped. And then came the denials.
Shell insists there are “no talks taking place.” BP, as usual, said nothing. But that silence speaks louder now than it might have in years past. Because for all the usual noise about “synergies” and “scale,” what this moment really exposes is a deeper question, what is BP in 2025, a misunderstood asset, or a structurally flawed company too burdened to merge?
Shell’s market cap is more than double BP’s, £151 billion versus £57 billion. That’s a gulf that didn’t exist fifteen years ago. Much of the disparity can be traced back to BP’s bruising journey since the Deepwater Horizon disaster in 2010, made worse by years of strategic uncertainty and a bold, arguably mistimed pivot toward green energy under Bernard Looney. The war in Ukraine and resulting surge in fossil fuel prices briefly gave BP a reprieve, but the company has spent most of the past decade struggling to convince anyone that it knows what it wants to be.
Under current CEO Murray Auchincloss, BP has begun walking back those green ambitions. It’s now edging back toward oil and gas with the language of pragmatism, not purpose. But damage has already been done, not just to investor trust, but to balance sheet flexibility. BP is weighed down by a substantial debt load, including hybrids and lease obligations, that make it an awkward fit for any buyer, even one with Shell’s firepower.
So why would Shell want it? Would this be a vote of confidence in UK energy consolidation, or simply a legacy company absorbing a wounded peer to shut the door on a competitor once and for all?
Shell says it’s focused on performance and shareholder returns. And in fairness, it has been executing well. The company is delivering strong cash flow, remaining disciplined on spending, and retreating (slowly) from its more aggressive energy transition targets, which, whether one likes it or not, is what shareholders have rewarded. Acquiring BP would jeopardise that narrative unless the synergies were truly extraordinary, and they might be, in theory, global LNG scale, North Sea consolidation, downstream overlaps.
But this is not Exxon buying Pioneer. This would be one wounded, strategically muddled oil major being swallowed by a better-run, but hardly problem-free, counterpart. And it would come at a time when political, regulatory, and ESG scrutiny is at a high.
Ultimately, the bigger story isn’t whether the deal happens. It’s what the rumour says about BP. If your best shot at unlocking value is being bought out, not leading, not adapting, not even thriving on your own terms, then you’ve lost the plot.
Shell might not make a move. But someone probably will. The question is whether they’ll be buying opportunity or a headache.