BP declares no taste for megamerger

BP's Bob Dudley has signalled he has no appetite for a megamerger, moving to cool speculation that Royal Dutch Shell's £55bn takeover of UK-based BG Group could trigger a wave of multibillion-dollar deals like those that reshaped the energy industry in the 1990s.

"I'm not sure big is absolutely seen as beautiful," the BP chief executive told delegates at an energy conference in Houston on Tuesday.

"We've got a good portfolio, I like our portfolio. We will see. I don't see the forces at work for lots of consolidation unless the oil price stays down for some time," said Mr Dudley, who was speaking at IHS CERA Week.

His comments, in response to a question, come amid mounting speculation in the markets, in the wake of the Shell-BG deal, that BP itself could be on the receiving end of a bid from one of its rivals, such as ExxonMobil, a long-rumoured potential bidder.

A near 50 per cent slide in oil prices since last summer has eroded revenues and profitability across the oil and gas industry, spurring comparisons with past slumps, including in the 1980s and in the 1990s, when a wave of mergers created the "supermajors" of today.

Exxon, in theory, would benefit from BP's presence in the Gulf of Mexico and gain a stake in Rosneft just as its own Arctic project with the state-owned Russian group has been frozen by western sanctions.

However, some analysts argue that such a bid is unlikely as long as BP's total liabilities from the 2010 Deepwater Horizon oil spill, already $44bn, remain uncertain.

Mr Dudley's remarks suggest that Exxon, were it to make a move, would have difficulty persuading the BP board to accept an agreed offer.

Though the UK-based oil major is seen as vulnerable to a possible bid, in part because its shares languish well below where they were before the 2010 spill, it is committed to a strategy of steep spending cuts and disposals aimed at improving shareholder returns.

The company denied a Bloomberg report that it had "stepped up internal reviews of takeover scenarios" following the Shell-BG deal.

"As a matter of prudent good practice, all companies have possible defence arrangements in place. However, BP has made absolutely no changes to our longstanding arrangements in response to recent moves in the market," said a spokesman.

But the BP chief executive, while playing down the prospects of a megadeal, predicted a huge round of restructuring in North Sea region, warning that the UK's mature fields would be hit hard by the collapse in oil prices.

"It's going to be a painful adjustment," Mr Dudley said of the North Sea. "I think you're going to see some massive restructuring going on."

The world's biggest oil companies have already been withdrawing from the UK North Sea, opening the way for smaller, specialist operators to come in. But the slide in oil prices has rendered many fields unprofitable.

Mr Dudley said the UK government's decision to cut taxes in last month's Budget would help, but would not reverse the effects of the steep fall in prices.

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