For years, BP has been tipped as a potential target of the next mega-merger deal in the oil industry.

Speculation about a blockbuster acquisition involving BP resurfaced again this year after activist hedge fund Elliott bought nearly 5% in the UK-based supermajor and demanded changes, big and fast.

BP’s shares have underperformed the stocks of the other four of the Big Oil group – Shell, TotalEnergies, ExxonMobil, and Chevron – ever since 2020.

Neither former BP CEO Bernard Looney, with the push toward renewables, nor his successor Murray Auchincloss, with the strategy reset to return on the path of oil and gas, have managed to erase the company’s underperformance in the past five years.

Speculation about another oil giant taking over BP is not new—such rumors have been swirling for over a decade, particularly ones suggesting that Shell could be the bidder for a merger with BP.

But this year, Elliott’s aggressive approach to the companies in which it buys significant stakes has rekindled speculation about BP becoming a target of the next mega-merger deal in the global oil industry.

Analysts aren’t ruling out anything, not even one of the U.S. supermajors – Exxon or Chevron – approaching BP for a potential deal.

At the start of this year, 6 out of 50 M&A experts surveyed by Bloomberg mentioned BP as one of Europe’s top mergers and acquisitions targets for 2025. BP collected the fourth-highest number of votes from these experts, after mining giant Anglo American, French video-game company Ubisoft Entertainment, and UK broadcaster ITV.

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Elliott’s demands for changes in strategy, board reshuffles, and a swift turnaround of the stock performance have prompted analysts this year to speculate about which potential suitor could be best positioned to take over BP.

A year ago, reports emerged that Abu Dhabi National Oil Company (ADNOC) had weighed buying BP, but talks didn’t go far, and ultimately, the state firm of the United Arab Emirates decided not to pursue a takeover of the UK supermajor.

A national oil company in the Middle East could be one possible BP suitor, considering BP’s presence in the region, especially in Iraq, where BP has just been given the go-ahead to a $25-billion contract to develop Kirkuk oil fields.

Yet, analysts tend to speculate more about a Shell-BP merger of equals or a potential Chevron approach for BP if the U.S. supermajor fails to complete the deal to buy U.S. Hess Corp.

BP also has a huge presence in the U.S. oil industry.

In the U.S. Gulf of Mexico, BP looks to boost its production capacity to more than 400,000 barrels of oil equivalent per day by the end of the decade, the company said this week as it announced an oil discovery in the deepwater U.S. Gulf of Mexico 120 miles off the coast of Louisiana.

The discovery at the Far South prospect comes as BP announced a few weeks back a strategy reset to shift focus back to growing oil and gas production and investments after a few years of trying to be an integrated energy company with a major presence in renewables.

In a very unfortunate development for BP, any positive share performance from the strategy reset was obliterated within a month by the tariff and trade wars, which crashed the price of Brent Crude oil to the low $60s per barrel.

Lower oil prices could test BP's ability to sustain its returns to shareholders, including dividends, especially as the supermajor flagged an increase in its net debt in the first quarter of 2025.

The pressure from Elliott on BP to boost returns and stock performance is likely to continue, as well as speculation over whether or not a split or acquisition of BP would give investors more bang for their buck.

As for who the potential buyer could be, Allen Good, director of equity research at Morningstar, told CNBC, “I wouldn’t take anything off on the table.”

By Tsvetana Paraskova for Oilprice.com

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