Sylvia Pfeifer BP’s shares rise on reports Shell looked at a takeover

Shares in BP hit a 6-month high this morning after a report that rival Royal Dutch Shell considered an opportunistic takeover bid for the UK oil group in the summer during the Gulf of Mexico oil spill.

BP’s shares were up 5 per cent to 488.85p at 10am this morning in London trading.

According to the report in the Daily Mail Shell weighed a bid while oil was still flowing into the waters of the gulf but decided against it because of the potentially uncapped legal liabilities facing BP. The paper says Shell might still bid for BP if another suitor emerges over the coming months but is unlikely to be the “first mover”.

The news is not a surprise – the board of every oil major, including Shell and Exxon, will have looked at a potential bid for BP at the height of the crisis. The company’s shares dropped to a low of 296p in June.

There is also history to a potential tie-up between BP and Shell, and former BP boss Lord Browne revealed in his autobiography how the BP board ruled out a merger with Shell in 2004.

The report will make uncomfortable reading for BP’s board which has been keeping a close eye on the company’s share price ever since the disaster. Prior to today’s report the shares languished some 200p below the level they were trading at before the April 20 accident.

Bob Dudley, BP’s new chief executive who took over from Tony Hayward in October, is due to present a new strategy for the group on February 1st alongside its fourth quarter results. Dudley knows he needs to have something fresh to say or BP’s share price will not respond to the announcement – making the company more vulnerable to a takeover approach.

There is still a question mark over the exact extent of the liabilities BP faces from the disaster – the Department of Justice announced in December it is suing BP and its partners in the Macondo well over the accident. Under the lawsuit BP faces penalties of $21bn-plus if found liable for damages and found guilty of gross negligence. BP has always denied the charge and it is a difficult one to prove.

The legal battle will take time to resolve but Mr Dudley knows that the clock is ticking on BP’s independence.