CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

BP and Shell shares hit 25-year low, Premier Oil sold in $3bn deal

With demand for oil low amid the coronavirus pandemic, shares in BP and Royal Dutch Shell have sunk to 25-year lows and prompted the sale of Premier Oil to North Sea operator Chrysaor for $3 billion to pay off its creditors.

  • BP and Royal Dutch Shell see shares struggle amid weak demand for oil due to Covid-19
  • Oil prices trade above $40 benchmark but for how long?
  • Premier Oil sold to Chrysaor for $3 billion to pay off creditors as market conditions worsen

Shares in BP and Royal Dutch Shell fell to 25-year lows earlier this month, after oil prices took a major tumble amid weakening demand due to Covid-19.

BP hit 32p per share on 1 October, while its rival Shell slid to a low of 907p – levels the pair have not seen since the mid-1990s.

Since the earlier decline in share price, both stocks have rebounded slightly to reflect the stabilising of oil prices to above the psychological $40 a barrel benchmark.

However, further declines in the price of crude are likely as investors grow increasingly concerned that the coronavirus pandemic will last until 2023 and that the oil and gas industry may never fully recover from the impact of the viral outbreak.

Brent crude is trading 3% higher on Tuesday at $42.68 a barrel at the time of publication, with the US West Texas Intermediate (WTI) up more than 3.5% at $40.69 a barrel.

Chrysaor signs reverse takeover deal for Premier Oil

North sea operator Chrysaor announced its reverse takeover of struggling oil and gas producer Premier Oil on Tuesday. The deal is valued at around $3 billion with proceeds from the sale used to pay off the company’s creditors.

The newly combined group will become the largest London-listed independent oil and gas company and is the latest deal in an industry primed for consolidation amid declining oil prices due to weak energy demand as a result of the coronavirus pandemic.

‘There is significant industrial, commercial and financial logic to creating an independent oil and gas company of this size with a leading position in the UK North Sea,’ Premier Oil CEO Tony Durrant said.

‘The transaction will also provide the Combined Group with a solid foundation from which to pursue a fully funded international growth strategy.’

Under the terms of the debt-for-equity deal, Chrysaor will own at least 77% of the combined group, with creditors in struggling Premier taking the second-largest stake in the newly formed company. Existing shareholders in Premier Oil will own less than 6%.

‘Through this deal we will become the UK's largest London-listed independent E&P, by all key metrics,’ Chrysaor CEO Phil Kirk said. ‘With our combined organisation and operatorship of a large part of our now international portfolio, we will have the ability to deliver value safely, and play our part in the energy transition.’

Premier Oil is shot up as much as 15% in early morning trading to 17p per share after news of the deal broke, with the stock down 84% year-to-date.

Brent crude: technical analysis

Brent crude has been on the rise over the beginning of the week, with price rising into a confluence of Fibonacci and trendline resistance, according to Josh Mahony, senior market analyst at IG.

‘The wider bearish picture remains in play unless we break through the $42.59 swing-high,’ he said. ‘With that in mind, this looks like an opportune moment for shorts, with a break lower likely from this confluence zone.’

How to trade stocks with IG

Looking to trade BP, Royal Dutch Shell and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘BP PLC’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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