The rumors suggesting Exxon acquisition of BP, which came out after Exxon issued its biggest bond offering since last year of almost $8 billion.
Exxon Mobil Corporation is the biggest energy firm of the world considering its market cap. British Petroleum is amongst the defensive company in the world.
During the second half 2014 the prices of crude oil has tumbled by almost 50%.However, Exxon Mobil is not much affected by these falling prices as its stock price decrease by 13% only during the same time period. While other energy companies like Chevron Corp and ConocoPhillips stocks have fallen at a higher rate compared to Exxon
There are rumors in the market that Irving based company is planning to attain BP in the current scenario of low price. According to Bloomberg, the oil giant has issued its one of the largest debt of $8 billion in the history, and Houston Journal believes that issue like this can only be intended to attain BP plc.
In the year 2010, the British oil company was culprit of oil spill took place in Gulf of Mexico that caused ruthless environmental damage. United States federal judge believe that the company showed gross negligent. The actual amount of the penalty being imposed on BP has not confirmed yet, however it is most likely that the company will face a penalty of almost$13 billion. Since the incident of oil spill, the British based company reputation has plunged and continuously surrounded by liquidity problems. Therefore, at this point of time, acquisition of BP by Exxon will be beneficial for the company itself.
From June last year, BP has witnessed over 17% decreases in its stock price. Previously, the company has bare $42 billion in aftershocks of the oil spill that’s why it’s facing liquidity problems. The company has reduced its labor force and capital expenditure.
In contrast, Exxon has amplified its Russia exposure, and is also looking to implement plans to increase its production of crude oil daily. Acquiring the British oil giant company will help them to act upon their plan. The size of the companies would enable them to witness economies of scale and less cost per unit on an average. During the time of tumbling oil prices
Moody’s have rated Exxon “AAA” rating with nearly 13,000 workforce in Houston compared to BP , which has about 10,000 employees. Market Cap of the Irving based company is thrice as much as of BP. And the merger will help the company to discover crude oil in other areas. Furthermore, Exxon is way better than BP, when it comes to legal issues.