April 26, 2015 5:45 pm
UK government warns BP over potential takeover
George Parker and Christopher Adams/FT
The British government has told BP it would oppose any potential takeover of the company, which was seriously weakened by the huge bill incurred after the Gulf of Mexico Deepwater Horizon disaster five years ago.
Amid wider consolidation in the energy sector, triggered by the sharp fall in oil prices, Downing Street has informed BP and senior City figures that it wants the group to remain a British industrial champion with global reach.
Prime Minister David Cameron has long presented Britain as a welcoming destination for foreign investment, but his government has made it clear that it would not remain neutral if the company were the target of a foreign takeover.
Analysts have in the past linked ExxonMobil, the world’s largest non-state oil company, to a possible move on BP. But British officials have told the Financial Times that Number 10 would be “sceptical” about any takeover — even if it involved Royal Dutch Shell, the Anglo-Dutch oil major — because it wants Britain to have two big global oil companies.
BP declined to comment on whether the UK government had discussed the issue with the company. But Number 10 said: “The government talks to a wide range of UK businesses, as you would expect. It is in the UK’s interest to have British companies competing and succeeding at home and abroad.”
Westminster officials admit that the UK would have few formal powers to block a bid, but a senior City figure briefed on the government’s thinking said: “They would make their opposition so clear that any foreign bidder would be deterred from actually making a bid.”
Successive Labour and Conservative governments have pursued a laissez-faire approach to takeovers, but both parties toughened their stance last year following public, political and business concern over a bid by Pfizer for AstraZeneca. The US drugs company eventually dropped the offer for its Anglo-Swedish rival.
BP has many assets that could interest Exxon, but the US company is seen as being unlikely to launch a bid, partly because of the political opposition it would encounter. The uncertainty BP faces over the final cost of its 2010 oil spill in the Gulf of Mexico, as well as its exposure to Russia through its stake in the state-controlled oil company Rosneft, would also deter the US group.
Rex Tillerson, Exxon’s chief executive, has been critical of practices at BP that he suggested contributed to the disaster, suggesting that integrating the two companies could be difficult.
Analysts and bankers say Exxon is also wary of overpaying for acquisitions, following criticism that it paid too much for XTO Energy, the US shale gas and oil company it bought for $41bn, including debt, in 2009.
Bob Dudley, BP chief executive, this week said the energy group had no appetite for a megamerger similar to those that reshaped the oil industry in the 1990s. “I’m not sure big is absolutely seen as beautiful,” he told a conference in Houston. “We’ve got a good portfolio, I like our portfolio.”
He added: “I don’t see the forces at work for lots of consolidation unless the oil price stays down for some time.”
The vulnerability of BP to a takeover has been discussed at a senior level in Whitehall since the Deepwater Horizon disaster, when an explosion on a rig working under contract for the company killed 11 men and triggered the worst offshore oil spill in US history.
BP is still counting the cost of the disaster. It has so far provided $43.5bn over the spill, but that includes only $3.5bn for the Clean Water Act penalty, and nothing for the possible natural resource damages.
The cost of the company’s settlement for the individuals and businesses affected by the spill is also expected to end up significantly greater than the $9.9bn included in its provisions.
Additional reporting by Ed Crooks
Copyright The Financial Times Limited 2015.