Oppenheimer analysts have pegged oil giant BP as a potential takeover target.
According to an article published on Platts, the recent weak oil prices, as well as affirmation in court of BP’s gross negligence during the Deepwater Horizon disaster, have crippled the company. BP is among the largest oil producers in the world, but these factors have shrunk the company’s market capitalization to $203 billion. The price-earnings ratio of BP’s stock is the lowest amongst its oil and gas peer group.
The analysis from Oppenheimer also noted that a continued price slump would cause industry consolidation, making BP a very valuable target. A merger with the U.K.-based company and another oil giant would result in the world’s largest oil producer, as well as cut upt o $10 billion in annual costs each year.
Potential buyers in the market could include ExxonMobil, Chevron, or even fellow U.K. giant Shell.
Although the majority of Deepwater Horizon-related spending is behind BP, the fines imposed under the Clean Water Act are yet to be paid. The total amount for each barrel of oil spilled during the 87-day disaster has not been decided, but the fines could reach as high as $4,300/barrel.
Remaining liability and financial vulnerabilities have been factored into the current implied reserve value for the company, which is about 55 percent lower than the peer average at $12.60 per barrel of oil equivalents.