Higher oil prices triggered by the Iran conflict have swollen cash balances at Europe’s biggest oil houses. BP’s trading arm lifted adjusted profit before tax by 43 % versus the previous quarter, while Bloomberg analysts project a 40 % rise in the group’s EBITDA this year. The windfall arrives as reserve replacement ratios have slipped a quarter since 2013, tightening the incentive to redeploy capital and fuels a scramble for strategic deals.

Shell seized the moment with a $16.4bn cash‑and‑shares offer for Canada’s Arc Resources, a deal that adds adjacent shale acreage and dovetails with its liquefied natural gas export platform. By using stock as currency, Shell can preserve dividend policy while expanding its upstream base, a move that could pressure rivals lacking similar balance‑sheet flexibility. The transaction also widens Shell’s presence in North America, a market where it has lagged.

BP, by contrast, faces a heftier leverage profile and has pledged to trim net debt to $14‑18bn by 2027, including retiring $4.3bn of high‑cost hybrid bonds. The debt‑reduction roadmap has buoyed its share price, outpacing peers this year, but the firm must balance cash‑flow discipline with the temptation to chase growth‑oriented acquisitions. Analysts see the deleveraging as a prerequisite for any future merger activity.