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Slick BP could attract a bid from Shell after asset sales

Disaster recovery

By Rob Davies
Last updated at 1:13 AM on 15th December 2010

BP was the strongest blue-chip riser on the Footsie as talk of a bid in the new year from Royal Dutch Shell resurfaced and the firm raked in nearly £500m by selling assets in Pakistan.

Trading in BP reached frenzied levels – boosting its shares by 14.75p to 473.1p – amid positive broker sentiment and fresh speculation that Shell or US rival Exxon Mobil could revive their interest in a bid during 2011.

BP’s share price languished as low as 304.6p following April’s Deepwater Horizon disaster in the Gulf of Mexico, sparking talk that several rivals were drawing up plans for an opportunistic bid.

Takeover whispers have all but fizzled out since then, as the company continues its road to recovery under new chief executive Bob Dudley.

But the sale of more than £13billion of BP’s less highly-prized assets, at good prices, has left behind a sleeker operation that could prove even more attractive to potential suitors.

BP’s shares were also buoyed by the sale of exploration and production assets in Pakistan for £492million to Hong Kong-based United Energy Group. The disposal takes the running total of post-Deepwater Horizon sales to £13.2billion, well over halfway towards BP’s target of up to £19billion by the end of next year.

Credit Suisse added to the upbeat mood around BP by rating the London-listed firm its long-term top pick in the oil sector for 2011.

The firm’s analysts slapped a target price of 585p on the stock, a 24 per cent premium to yesterday’s closing price.

They said markets had been too pessimistic on the total bill arising from the firm’s leaking Macondo well, which caused the worst oil spill in US history.

BP now looks likely to avoid a charge of gross negligence, which would have seen environmental fines spiral from £3.5billion to £13.8billion. The bullish assessment from Credit Suisse came hot on the heels of a note from brokerage Killik, which also rated BP as one of its top picks for the coming year.

BP’s woes in the Gulf of Mexico have so far taken a £34billion chunk out of its market value – which stood at nearly £89bn yesterday. But analysts’ optimism is rooted in the expectation that the overall cost of the disaster will be far less than the stock market hit.

Dudley – who took over from Tony Hayward at the beginning of October – is expected to reinstate the firm’s frozen dividend at fourth- quarter results in February, albeit at a lower level than the pre-Deepwater Horizon payout of nearly 9p per share.

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