Re-Posting: Bloomberg's Take On COP Vs BP -- May 30, 2024

Locator: 47997B.

May 30, 2024: link here. 

ConocoPhillips’ $17 billion deal for Marathon Oil Corp. fits neatly into the trend of consolidation in US oil, but it also provides a lens to survey the shifting balance of power in the global industry.

Go back to the start of the century. The biggest Western oil company was, as it is today, Exxon, weighing in at a market value of about $200 billion. But Britain’s BP Plc, fattened by the 1998 takeover of Amoco, wasn’t far behind at more than $190 billion. Conoco, before its merger with Phillips, was worth just $11 billion.

After yesterday’s announcement, ConocoPhillips is heading for a market value of more than $150 billion, dwarfing BP’s current $103 billion capitalization.

BP’s travails — from the Macondo oil-spill catastrophe to a misfiring energy-transition strategy — are well-documented, and plenty has been written about the relative valuations of oil equities in the US and Europe. But it’s still instructive to dig a little deeper.

The big difference between the two companies is that while BP remains a fully integrated wellhead-to-gas-station oil major, ConocoPhillips got rid of refineries more than a decade ago.

For the past five years, the US firm has carefully honed its portfolio to break even at less than $40 a barrel, leaving ample headroom for buybacks and dividends.

BP and the combined Conoco-Marathon pump about the same amount of oil and gas. So investors are giving little or no credit for BP’s giant refining and marketing business, which sells fuel to millions of motorists daily, as well as a world-class trading operation.

One striking statistic: BP employs almost 90,000 people, Conoco and Marathon just 12,000.

What to make of the comparison? First, it’s a vivid illustration of the US premium — it’s little wonder Shell Plc boss Wael Sawan and TotalEnergies SE’s Patrick Pouyanne have floated the idea of a New York listing.

Second, it shows how far BP’s star has waned in the past quarter of a century. After shaping the modern oil industry from the US to Russia, the producer is now a laggard.

Once considered a supermajor, the company has been outstripped by a super-independent.

--Will Kennedy and Kevin Crowley, Bloomberg News