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Opportunistic takeover bid of BP by ExxonMobil or Shell

Oil giant makes its comeback

Comeback: The oil giant climbed to the top of the risers in latest trading

By Alex Brummer
Last updated at 1:12 AM on 15th December 2010

No one should get too starry-eyed about BP. The shares are still £2 below the peak achieved before the Macondo well explosion in April, the dividend is still in abeyance and the White House-appointed oil claims czar – Kenneth Feinberg – is still spending the group’s money as the claims from the Gulf region pour in.

Nevertheless, it could be much worse.

Under the settled claims BP receives a legal release; this prevents those taking the cash now from suing. So the fear, at the peak of the crisis last summer, that eventually a renegade, elected Texas judge would make a ruling which would represent an existential threat to the company (as was the case at Texaco a generation ago) has retreated.

In the meantime the great assets sale, put in place to fund the $20billion compensation fund, continues. The sale of BP’s interests in Pakistan to Hong Kong-based explorer United Energy Group means the disposals have reached $20.8billion (£13.2billion).

The speed at which this target has been achieved is remarkable and testimony to the trading skills of chief executive Bob Dudley and his team.

The stock market appears to have picked up this message and BP climbed to the top of the risers in latest trading. This may be in anticipation of a restoration of the dividend now that the disposals have largely been made, some at better-than-expected prices.

What has never been in doubt is the company’s ability to find new oil, since over the decades it has been better at that than most of its competitors.

If there is a problem going forward it is that extraction costs are going to be far higher given the amount of safety redundancy that must be built in. One of the worrying things for BP’s management is that now the costs of the spill have been capped there remains, at the current share price, the possibility of an opportunistic takeover bid with both ExxonMobil and Shell potential candidates.

If that were to happen, BP chairman Carl-Henric Svanberg may, spare the thought, have less time to spend with his yacht or on the golf course.

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