Will the oil giant BP be acquired or dismantled, and what is its future?

As BP's stock price continues to languish and rumors of acquisitions swirl, the Abu Dhabi National Oil Company (ADNOC) has joined the bidding war for BP.

According to media reports on the 12th citing informed sources, ADNOC is weighing how to acquire certain assets if BP chooses to split or seek to divest more business units.

ADNOC has shown the strongest interest in BP's liquefied natural gas (LNG) assets, although the company has also considered a full acquisition of BP. It is understood that any potential deal could be conducted through ADNOC's international investment department XRG.

Maurizio Carulli, a global energy and materials analyst at Quilter Cheviot, stated that the rumors of ADNOC's interest in BP's partial assets represent a "significant" development—although this is somewhat expected, as ADNOC is a cash-rich growth company seeking further expansion into the gas sector. Carulli said:

"That said, ADNOC seems unlikely to consider a full acquisition of BP because the company would not have strategic interest in BP's oil assets. However, some other listed oil giants may consider it."

Is BP about to be divided? Can strategic reset turn the tide?

Long-standing underperformance relative to peers has pushed BP into the spotlight as a potential acquisition target. British competitor Shell, as well as American oil giants Exxon Mobil and Chevron, are seen by the market as possible acquirers.

Last month, BP's Castrol lubricants business, one of its portfolios, reportedly attracted interest from several potential buyers. According to media reports on May 28 citing informed sources, several institutions, including Indian Reliance Industries, Saudi Aramco, and private equity firms Apollo Global Management and Lone Star Funds, were previously viewed as potential acquirers of BP's Castrol business.

BP is trying to fend off potential acquisitions by restoring investor confidence. Earlier this year, the company initiated a fundamental strategic reset, and although first-quarter profits fell short of expectations, CEO Murray Auchincloss stated in late April that the company was "off to a good start" in achieving its new direction.

As part of the strategic reset, BP announced plans to increase annual oil and gas investments to $10 billion by 2027 while cutting renewable energy spending. The company also plans to divest $20 billion in assets over the next few years.

After a sharp decline in BP's stock price in early April, it has stabilized in recent weeks. The stock price has fallen more than 5% year-to-date.

ADNOC's $80 billion ambition

At the time of ADNOC's interest in BP's partial assets, the investment company is seeking gas and chemical asset transactions to help it reach its $80 billion enterprise value target. ADNOC's al-Jaber stated:

"We are committed to creating long-term value for stakeholders and strengthening Abu Dhabi and the UAE's position as global leaders in energy and chemicals."

AJ Bell Investment Director Russ Mould stated that any potential deal between ADNOC and BP could involve tough negotiations, with both sides striving to protect their own interests.

"BP is under pressure to achieve its debt reduction targets, which need to be met through improved organic cash flow and asset disposals," Mould said:

"ADNOC is well aware of this and knows that time may be running out for BP's management, so if the rumors are true, it will strive for better terms during the negotiations."