Shell acquires BP, potentially becoming this year’s largest merger-and-acquisition deal.

A BP spokesperson declined to comment. Shell holds a stronger position in the negotiations, with its stock performance significantly outpacing BP’s in recent years. Like BP, Shell is headquartered in the UK but operates globally, with a market capitalization exceeding $200 billion. BP has lagged behind its major oil peers due to its aggressive pivot from fossil fuels to renewable energy, compounded by years of management turmoil and operational disasters. Elliott Investment Management, an activist investor holding over 5% of BP’s shares, has been pushing the energy company to enact change since at least February this year—highlighting the possibility that BP may face acquisition offers from competitors. Since then, BP has taken several steps to appease investors. Earlier this year, the company announced plans to increase oil and gas production while drastically cutting investments in clean energy. BP is also seeking to sell its Castrol lubricants business and has indicated it may divest at least part of its solar subsidiary Lightsource. Most recently, BP stated that Helge Lund, its chairman and chief architect of its low-carbon strategy, plans to step down. Meanwhile, Shell has focused on its most profitable businesses, pledging to expand oil and gas production while scaling back green-energy targets. Shell CEO Wael Sawan recently stated publicly that the company’s threshold for large-scale deals remains high. In May, Shell announced a multi-billion-dollar share buyback program—the latest installment of its long-term, large-scale buyback initiative. According to a prior Wall Street Journal report, Shell has been working with banks to plan the sale of its chemical assets in Europe and North America. An acquisition of BP would require Shell to undertake a multi-year integration process, complicated by cultural clashes and the likely need to divest overlapping assets. Yet such a deal could broaden Shell’s global trading footprint and strengthen its dominance in areas like liquefied natural gas (LNG). Analysts and investors also note strong complementarity between the two companies’ operations in the Gulf of Mexico. The acquisition would offer Shell opportunities to spread costs across a larger operational base and eliminate a key competitor. Moreover, Shell is politically more acceptable to UK regulators—who might oppose a foreign buyer acquiring BP, a century-old company whose origins trace back to oil exploration in Persia during the height of the British Empire.

Oil and gas companies reap windfall profits, delighting shareholders with generous dividends.

Chevron posted its highest-ever quarterly earnings, buoyed by robust fuel margins and high prices for natural gas and crude oil. In Q2 2022, the oil giant reported net income of $11.6 billion, or $5.95 per diluted share—more than triple its $3.1 billion ($1.60 per share) profit in the same period last year. Chevron’s average U.S. sales price for crude oil and natural gas liquids stood at $89 per barrel in Q2 2022, up from $54 per barrel a year earlier. The California-based energy giant produced 1.72 million barrels of oil equivalent per day in Q2 2022—a decline of 266,000 barrels per day compared with Q2 2021. Occidental Petroleum On its Q2 earnings call, Occidental Petroleum CEO Vicki Hollub told investors the company plans to “repurchase a substantial amount of stock over the next few years—or at least we hope to. We believe there’s no need to increase production beyond this point, as we feel the highest-value use of our capital right now is investing in our own stock.” Occidental Petroleum has repaid most of the debt incurred from its 2019 acquisition of rival Anadarko Petroleum. In Q2 2022, the company repaid $4.8 billion in debt and launched a $3 billion share buyback program. As of August 1, Occidental reported having spent $1.1 billion to repurchase shares. The Houston-based energy company reported adjusted earnings of $3.2 billion, or $3.16 per share. The U.S. Federal Energy Regulatory Commission approved Warren Buffett’s Berkshire Hathaway application to increase its stake in Occidental to at least 50%, underscoring strong investor confidence in the company’s strategy: continuing oil production while simultaneously developing technologies to reduce carbon emissions from fossil fuels. Shell Driven by surging prices for crude oil, natural gas, and petroleum products, Shell’s Q2 2022 profit exceeded its record-setting prior quarter—prompting the European oil major, just one month earlier, to extend its share buyback program. After completing $8.5 billion in share buybacks during the first half of 2022, Shell announced a new $6 billion buyback program for Q3 2022. While high oil prices typically squeeze refining margins, tight refined-fuel supply pushed Shell’s refining margin nearly tripled—to $28 per barrel. Shell is expected to exceed its general guidance for shareholder returns, reaching up to 30% of operating cash flow. However, Shell has not raised its dividend from the current level of $0.25 per share—a modest 4% annual increase following a 60% cut during the pandemic. TotalEnergies Soaring European natural gas demand and gasoline prices propelled TotalEnergies’ profits to record levels. After repurchasing $3 billion worth of shares in Q1 2022, TotalEnergies announced an additional $2 billion share buyback for Q3. Nevertheless, analysts consider TotalEnergies’ buyback program relatively conservative—limiting potential upside for its stock price. The article concludes by noting TotalEnergies’ report that Q2 2022 net income will surge 2.6-fold to $5.69 billion, up from $2.21 billion a year earlier, while revenue rises 59% to $74.77 billion.

Shell Announces $5 Billion Buyback as Oil Refining Booms

3 days ago

Shell Plc announced a $5 billion share buyback following record refining margins driven by geopolitical conflicts disrupting global fuel capacity. Adjusted net income surged to $10.8 billion, with downstream profits reaching an all-time high.

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