As the BP and Shell share prices surge, are they still good buys?

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on Oct 24, 2023
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  • ExxonMobil recently acquired Pioneer Natural Resources.
  • Chevron announced a deal to acquire Hess for $53 billion.
  • Will BP, Shell, and TotalEnergies announce a deal this year?

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Shell (LON: SHEL) share price has surged to a record high, helped by the soaring crude oil price. The stock reached a high of 2,800p in London this month. At its peak, the stock was up by over 276% from its pandemic lows. Similarly, BP (LON: BP) soared to a high of 560p, 250% above its lowest point in 2020.

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Will Shell and BP grow bigger?

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The energy market has been in a frenzy in the past few weeks. Exxon Mobil, the biggest western oil and gas company, acquired Pioneer Natural Resources in a $59.5 billion deal. And this week, Chevron announced it was acquiring Hess, a Guyana-focused company in a $59.5 billion.

Analysts believe that there will be more deal-making in the energy sector in the coming months as companies take advantage of their expensive share prices and deep liquidity. As I wrote recently, Devon Energy is one of the most attractive buyout option. 

Other companies that could be acquired are Occidental, Chesapeake, ConocoPhillips, and DiamondBack. Reports suggest that CrownRock is considering placing a bid for Southwest Energy while Devon is studying a bid for Marathon.

The question among investors is whether European majors like Shell, BP, and TotalEnergies will consider expanding their businesses through acquisitions. Unlike their American counterparts, these firms have focused mostly on clean energy and ESG. 

European governments and investors have been quite harsh on energy companies. For example, the UK and other European governments announced huge windfall taxes as their profits jumped. In the Netherlands, Shell is under legal obligations to slash its emissions in the coming years.

We will get a clear picture about moves by these companies in the coming days as BP and Shell publish their earnings. BP will publish its results on October 31st while Shell will release its on November 3rd.

BP and Shell share prices outlook

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BP chart by TradingView

I believe that Shell and BP stocks will continue doing well in the coming months. For one, there are signs that the war between Israel and Hamas will continue for quite some time. And there are risks that it will expand, especially if Israel decides to launch a ground operation.

Therefore, there is a possibility that the price of crude oil will continue rising. Brent was trading at $90 while West Texs Intermediate (WTI) was hovering at $84. Analysts at JPMorgan believe that Brent will surge to $150 in the coming months.

BP and Shell will thrive as long as oil prices are above $70 a barrel. Therefore, in this case, there is a likelihood that BP shares will bounce to over 600p while Shell stock will surge to 3,000p. In addition to the positive fundamental news on oil, this view is supported by the strong dividends and technicals.

Still, for most people, especially those with access to American stocks, I recommend investing in US majors like Exxon and Chevron. Other smaller oil companies like Devon Energy and Occidental are great as well.

BP Chevron ExxonMobil Occidental Petroleum Corporation Oil Pioneer Natural Resources Shell UK Energy Political Stock Market Trading Ideas