BP takeover speculation sees share price surge

Fresh speculation linking BP to an opportunistic takeover bid from rival Royal Dutch Shell sparked a surge in shares at the beleaguered firm today.

Rising oil prices and reports that BP may not need all of its 20 billion US dollar (£12.8 billion) compensation fund to repay the victims of the Gulf of Mexico oil spill also contributed to the 5% improvement.

The rally added £4.8 billion to the company's market value and took BP shares to their highest level in six months. At 491p they are still way down on the peak of 655p seen before the explosion.

According to the Daily Mail, Shell considered a takeover bid for BP after its rival's share price slumped by half following the Deepwater Horizon explosion in April, which spilled hundreds of millions of barrels of oil into the Gulf of Mexico.

Shell decided against making an offer because of the threat posed by unlimited liabilities relating to the spill.

But the company resolved to step in with a counter offer if one of the American oil giants Exxon Mobil or Chevron bid first, said the newspaper.

Senior Shell executives still believe the two firms would make good partners and a merger could create significant cost savings, it added.

BP is due to publish full-year results on February 1, when it may announce a resumption of dividend payments.

This prospect has been lifted by the rising price of crude oil, which today reached 92 US dollars per barrel at a near two-year high.

Meanwhile, Kenneth Feinberg, the lawyer administering BP's compensation fund on behalf of the US Government, is reported to have said that 10 billion US dollars may be enough to repay the victims of the spill.

David Hart, an oil and gas analyst at Westhouse Securities, said: "These reports may give investors reason to believe that a dividend could be brought back sooner rather than later and that could have quite a positive impact on the share price."

The US Government is also suing BP in a separate claim, but a payout could take years, he added.