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Investing.com - Shell (NYSE:SHEL), currently trading near $70 with a market capitalization of $208.5 billion, is in active discussions to acquire BP (NYSE:BP), according to a Wednesday Wall Street Journal report that sent BP stock soaring up to 10% while Shell shares declined. InvestingPro analysis suggests Shell is currently undervalued.
The potential combination would create one of the largest oil and gas mergers in history, though the talks are reportedly progressing slowly. The news revived takeover speculation surrounding BP that had recently been subsiding, according to Raymond (NSE:RYMD) James. Shell, a prominent player in the Oil, Gas & Consumable Fuels industry, has maintained dividend payments for 21 consecutive years, demonstrating consistent financial stability.
A merged entity would establish unmatched scale in global liquefied natural gas (LNG) operations and create a trading organization that would significantly outsize competitors. The combination could also strengthen BP’s balance sheet, which has been a frequent concern among investors. Shell currently operates with moderate debt levels and maintains a healthy EBITDA of $51.3 billion. Get deeper insights into Shell’s financial health with a comprehensive Pro Research Report, available exclusively on InvestingPro.
The deal faces substantial challenges, including complex integration requirements and potential regulatory hurdles. Regulators might resist the transaction given BP’s historical significance and concerns about the combined company’s market position, despite arguments that it would create a European champion better positioned to compete with American giants Chevron (NYSE:CVX) and Exxon (NYSE:XOM).
Raymond James analysts indicated the potential merger "makes sense and has many merits," while emphasizing that successful execution would be critical if the companies proceed with the transaction.
In other recent news, Shell plc has reported a series of significant developments impacting its operations and strategy. During its Annual General Meeting, Shell’s shareholders approved most of the company’s strategic resolutions but notably rejected a proposal concerning its liquefied natural gas (LNG) business. The company plans to engage with shareholders to better understand their concerns regarding the LNG strategy. In the financial sector, Piper Sandler raised Shell’s stock target to $80 while maintaining an Overweight rating, citing the company’s strong first-quarter performance and ability to fund capital expenditures, dividends, and buybacks. Meanwhile, TD Cowen adjusted Shell’s stock target to $76, maintaining a Buy rating and highlighting the company’s robust balance sheet and dividend coverage.
Additionally, Shell Offshore Inc. has commenced production at its Dover (NYSE:DOV) project in the Gulf of America, expected to peak at 20,000 barrels of oil equivalent per day. This project is part of Shell’s strategy to optimize resource extraction using existing infrastructure. In a leadership update, Shell USA announced that Colette Hirstius will assume the role of President, succeeding Gretchen Watkins in August 2025. CEO Wael Sawan expressed optimism about Shell’s future growth in the US under Hirstius’s leadership. These recent developments underscore Shell’s ongoing efforts to enhance its operational efficiency and shareholder value.
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