FROM A REGULAR CONTRIBUTOR
Firstly, falls in oil price and resulting low stock prices tend to result in waves of takeovers.
Examples during the low price era of the late 1990s – early 2000s:
· Exxon took over Mobil
· Statoil took over Saga, Norsk Hydro
· Chevron took over Texaco, Unocal
· Total took over Fina and Elf
· BP took over Vastar, Amoco and Arco
Shell is notably absent from this list – over the past ten years the gossip on the street has considered possible mergers involving Shell, BP and Total and even the demerger of Shell Oil, but the numbers apparently did not add up. Perhaps the fall in share prices over the past six months and a lack of exploration opportunities has once again made mergers more attractive than organic growth.
In many cases the mergers were little more than acts of desperation when a company had lost its way, often as a result of poor management. Texaco was weakened by the Getty law suit, Elf was embroiled in corruption scandals, Unocal was running out of money. Shell came close to being taken over as a result of the reserves scandal, while BP still has Macondo hanging over its head.
There are a few big unresolved cases still hanging over the industry – Shell’s involvement with ENI in the OPL 245 bribery investigation, and the EU investigation of oil price fixing to name just two. The big banks have felt the wrath of regulators over the past few years, and perhaps there are a few more skeletons about to emerge from the cupboards of the oil industry. The assumption that Shell and BP will merge is a simple proposition, but Shell has no experience of making a merger work and I doubt whether BP needs any more on its plate. There may be some other possible scenarios about to play out.