(Bloomberg) – The dramatic performance of BP PLC compared to other oil majors reached a crunch point. This is an incoming showdown with one of the world’s most aggressive activist investors.
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Elliott Investment Management, led by Paul Singer, has built a big stake in the UK energy giant. It is usually the first step in a playbook that has been rolled out to successfully push change in many other large companies. Over the years, the fund’s efforts have led to a change in strategy, a CEO’s departure, and even a disbandment of companies.
The intervention ranged from the disaster at Deepwater Horizon, after BP has overcome a string of failures over the past 15 years, to the sudden firing of former CEO Bernard Droney for his personal actions.
Rooney’s false bet in 2020 is that BP’s ratings are lagging behind its peers as global oil consumption is peaking and the world is accelerating towards net zero emissions. According to people familiar with the issue, some of those rivals are running numbers on what the acquisition looks like. It is not clear whether anyone is seriously considering the move, but the fact that such deliberations are taking place is an indicator of how far the London-based giant has fallen.
Over the past five years, BP stocks have fallen almost 8%, compared to an approximately one-third increase in its closest rivals, Shell PLC and Totalenergies SE.
Elliott urges BP to increase shareholder value by promoting BP to consider transformational measures, according to people familiar with the issue that he asked to not be identified because the discussion was private. It’s there. It’s a company that’s been significantly undervalued and they think its performance is disappointing, they said.
Representatives of activist investors declined to comment and the exact size of the stock could not be learned immediately, but their track record could be faced by BP’s current CEO, Murray Auchincloss. It shows pressure.
The 54-year-old Canadian stepped up to lead BP after Rooney was fired suddenly, taking on a temporary role in September 2023 and forever in January 2024.
Since then, the former finance chief has taken steps to reshape the company internally, but has not said it publicly. He negotiated access to some of the Middle East’s largest crude oil reserves, emitted renewable energy assets, and recently pledged to fire around 5% of the company’s full-time employees. I gradually moved away from the oil and went for a walk.
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This was not enough for some analysts and investors. Analysts and investors looked at the narrow window and reset the direction of the company, almost at its end. The strategy update scheduled for this month is considered a key moment for Auchicloss, so the event will be delayed in two weeks until February 26th, moving from New York to London to allow CEOs to recover. , the problem was not helpful. From unpublished medical procedures.
The wrong strategy
“The event should stand as a key line of sand following the initial energy transition strategy announced in 2020. This includes macro assumptions that are not harmonious to reality.” says Biraj Borkhataria, an analyst at RBC. “The heart of the BP issue, along with these strategic changes, is linked to a decline in capital allocation, which has worsened the potential for revenue.”
Auchicloss is expected to focus on renewable energy and on the core oil and gas business. However, there are many questions as to whether BP has the resources to quickly achieve such a pivot, and whether investors still have patience.
Elliot is certainly not known for his waiting approach. And there are many levers that the fund can pull to force a more rapid shift.
BP’s management team and board have remained largely unchanged since the Rooney era and could be Elliott’s target. Chairman Helge Lund is known as the company’s net zero strategy architect along with his former CEO.
In other companies, Elliott successfully campaigned for the breakup. While BP’s magnitude entities offer many possibilities, its core oil and gas business is highly integrated with everything from refineries and fuel stations linked by trading teams across the globe. There is a value chain.
The most obvious division is between clean energy and fossil fuels, a process already partially launched under Auchincloss. He has announced a spin-off of BP’s offshore wind business to the joint venture, working on off-roading onshore wind assets.
BP still has full ownership of solar energy, Lightsource, battery storage unit. BP describes “engines for renewable power on land” along with the same onshore wind farms that it is currently trying to sell in the US.
The company has an electric vehicle charging unit. This is a major expansion plan in the US after Rooney bought American Travelcenters in 2023 for $1.3 billion. BP has 37,500 chargers installed around the world, with over 100,000 chargers aimed to reach over 100,000 by 2030.
Elliott’s intentions remain unknown, but the first moment of leverage for activist investors may be days away.
BP reported fourth quarter financial results on Tuesday, reporting that it already flagged widespread decline throughout its business at the time. Most other oil majors have experienced the same worsening market, but the weaknesses on the balance sheet alone have only BP to slow down the pace of stock buybacks, and in recent years it has become an essential tool to keep investors happy. It’s weakening.
– Support from Swetha Gopinath.
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