BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) may find themselves at the negotiating table as American peers Exxon Mobil Corporation (NYSE:XOM) or Chevron Corporation (NYSE:CVX) could come calling, that’s the view of analysts at Citigroup.
A megamerger between either London-listed oil major and either of America’s largest oilers appears increasingly attractive, on valuation terms at least, according to the Wall Street bank.
There’s a wide value gap between the transatlantic peers with the European oil and gas sector nowadays enduring softer investor sentiment, distracted by different attitudes to ESG and energy transition than seen stateside, all of which leaves an apparently widening value gap.
A megamerger would, in theory, help European valuations cinch the gap in a way that Citi doesn’t think will otherwise happen organically - or, at least, that’s the broker’s pitch.
“Markets are unlikely to close the gap by themselves,” Citi analyst Alastair Syme said in a note.
“The CoE of European oils remains handcuffed by investor and political headwinds.
“What is really needed is for the industry to arbitrage this value itself.
“We look at the strategic imperative, financial accretion and political headwinds of either of the two US IOCs (Exxon or Chevron) potentially looking to try and acquire one of their key European competitors (BP, Shell or TotalEnergies).”