Are BP's days numbered?

30 June 2010

BP's future has come under fire following comments from JP Morgan Cazenove that the beleaguered oil major should be bought by US rival Exxon Mobil.

JP Morgan analyst Fred Lucas said Exxon or Anglo-Dutch giant Shell could swoop with a bid for £88 billion, in the wake of the devastating Gulf of Mexico oil spill.

While Lucas stressed that it was only an idea, he said Exxon remains the most financially strong company and could make a cash and stock offer while spinning off $50 billion of refining and marketing assets.

The estimated 473p per share offer is substantially greater than the current £57 billion market value of BP, but some 30% below what it was worth prior to the Deepwater Horizon explosion on 20 April.

The staggering amount wiped off the oil giant's value since the explosion has prompted speculation in the market over whether BP could be vulnerable to a takeover.

However, BP has already instructed Goldman Sachs and Blackstone to defend against any possible hostile takeover bids.

The oil giant's share price has seesawed back and forth this week, on fears that the impending hurricane could hamper clean-up operations which have rocketed to $100 million a day.

Its share price dipped below the psychological 300p mark at one point on Tuesday, as weather forecasts for the hurricane season upped the ante.

Oil skimming ships were commanded back to land amid heavy winds and strong currents, despite the storm not expected to directly hit the site of the explosion.

However, its shares rallied over 5% on Wednesday on reports that the effects will not be as bad as first thought.

So far, BP has spent $2.65 billion on clean-up efforts and committed $20 billion to a claims fund over the next three and a half years.

It is currently charging ahead with drilling two relief wells, which are widely believed to the ultimate tool in halting the leak.

Its shares were pegged at 319p in morning trading. 

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