BP's spill deal is 'catalyst' for acquirers as uncertainty ends

London

BP plc's US$18.7 billion US legal settlement is being cheered by investors and analysts as it ends five years of financial uncertainty. It also makes the British oil producer a more attractive takeover target.

Potential buyers, held back by unquantifiable liabilities related to the company's 2010 Gulf of Mexico spill, may find a slimmed down BP more appealing and digestible.

"The market is looking at that," said Ahmed Ben Salem, a Paris-based analyst with Oddo & Cie, who has a neutral recommendation on BP. "This could act as the catalyst because there's more clarity now."

A slimmed down BP is also an attraction for potential buyers because it has the lowest enterprise value relative to its daily oil and gas production of any of the six largest US and European energy producers. Based on the current share price, the ratio is less than half that of Exxon Mobil Corp.

Still, while BP has a lot to attract potential acquirers, including good deep-water prospects in Angola and the Gulf of Mexico and an industry-leading trading outfit, the company's size makes Exxon the only likely buyer, Oddo's Mr Salem said.

"Both have assets in the Gulf of Mexico and both work with Rosneft in Russia," he said.

The settlement this week removes the "overhang" on the shares and "it could help attract new investors, if not potential suitors", Investec Bank plc analysts led by Neill Morton wrote in a report on Friday. Bloomberg