BP PLC’s (NYSE: BP) augmented focus on renewable energy at the expense of its core oil and gas operations has resulted in a sharp downtrend in its stock price over the past 12 months.
While the energy giant has already committed to lowering spending on renewables and reset its focus on the oil and gas segment in a bid to rebuild investor confidence, the damage to its share price has already made BP a prime candidate for a potential takeover.
“Certainly, BP is a potential takeover target – no doubt about that,” Maurizio Carulli, a Quilter Cheviot analyst, told CNBC in a recent interview.
BP shares are currently down more than 30% versus their 52-week high.
Could Shell approach BP with a buyout proposal?
Continued weakness in BP stock has triggered speculation that peer Shell would consider a buyout to expand its footprint in the global energy markets.
According to Morningstar’s director of equity research, Allen Good, a potential transaction between Shell and BP would likely be a merger rather than an outright acquisition.
However, a potential agreement between the two will likely trigger competition concerns, argued Quilter Cheviot’s Carulli in his CNBC interview.
His remarks arrive only weeks after activist investor Elliott Management announced a 5.0% stake in BP.
Chevron could be a potential suitor for BP
Another potential suitor for BP could be the Houston-headquartered Chevron Corp, particularly since the fate of its $53 billion Hess deal hangs in the balance amidst legal uncertainty.
If the US firm fails to close its Hess transaction, London-based BP could offer it a good enough alternative to deliver on its commitment to global expansion.
Such a transaction will likely make sense given BP “is the most US-exposed of all oil majors, even more than Exxon and Chevron,” noted Michele Della Vigna of Goldman Sachs in a recent CNBC interview.
BP currently generates about 40% of its cash from the US.
Is it worth investing in BP stock in 2025?
BP was once the most celebrated oil and gas company in the UK.
In February, it reported $1.169 billion in underlying replacement cost profit for its fourth quarter, which missed experts’ forecast of $1.2 billion and represented a 61% decline on a year-over-year basis.
At the time, BP attributed its disappointing bottom line to “weaker realised refining margins, higher impact from turnaround activity, seasonally lower customer volumes and fuel margins.”
Despite ongoing weakness, however, the energy stock has not fallen out of favour with Wall Street analysts.
The consensus rating on BP shares still sits at “overweight” with the mean target of about $36, indicating potential upside of well over 30% from here.
Plus, BP stock currently pays a lucrative dividend yield of 6.90% that keeps it somewhat more attractive to own at current levels.
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