THE WALL STREET JOURNAL. BLOGS

JUNE 2, 2010 1.52 PM ET

By Michael Corkery

BP may be a bargain right now. It has lost 36% of its value, some $74.4 billion in all since the oil spill began on April 20.

With a total market cap of $117 billion, BP is now near the bottom of the heap of the world’s five major energy companies. Exxon, by comparison, has a market cap of $281 billion. Total S.A., which had long been in BP’s rear view mirror, is catching up with a value of $103 billion.

So why wouldn’t now be a good time for one of those majors to make a play for BP? There’s no denying that the company has an environmental disaster on its hands. But BP is one of the crown jewels of the energy world, with assets in more than 100 countries, $18.3 billion of reserves and $239 billion in revenues last year.

Still, there are plenty of reasons to consider why a BP takeover is unlikely.

The biggest is the most obvious. The vast, and unknown amount of damages and legal liability stemming from the largest oil spill in U.S. history. Those costs could hit $40 billion, according to Credit Suisse analysis. The company has already spent a $1 billion cleaning up the spill, and that amount could easily grow. Don’t forget the criminal probes, which could have all kinds of consequences for the company and its management.

That alone should take the air out of a a potential BP takeover. But that hasn’t stopped the speculation, of course.

“There is a 10% to 20% chance of BP being taken over, ” Gudmund Halle Isfeldt, an Oslo-based analyst at DnB NOR ASA, told clients in a research note this week, according to Bloomberg.

Royal Dutch Shell and Exxon Mobil are being cited as the two most likely acquirers, according to a Raymond James research note this morning .

Another threat to a deal is from U.S. regulators. The Obama administration has put a moratorium on any new off – shore drilling in the Gulf of Mexico and off the coasts of Virginia and Alaska.

BP has planned 10 new projects in the Gulf over the next five years. The company already has 500 leases in the Gulf, pumping 450,000 barrels a day. It’s U.S. operations alone are worth about $98 billion, according to J.P. Morgan analyst Fred Lucas.

There are other issues unrelated to the spill. According to Raymond James, any merger of energy giants would trigger antitrust concerns both in Europe and the U.S. , given how much it would concentrate drilling assets.

And let’s not forget the risks for any buyer beyond any of the oil-spill mess: Obtaining financing in the volatile credit and stock markets is not easy. Integrating two massive companies energy at a time of turmoil at BP could also prove difficult.

“We’re getting into share price territory where analysts speculate about takeover possibilities, because the loss of market value is much greater than the estimated ‘worst case’ costs,” Ivor Pether, who helps manage $9.2 billion at Royal London Asset Management, including BP shares, told Bloomberg.

He sees only one problem: “There aren’t any buyers at this point because the near-term uncertainty is so high.”

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