BP () has announced a major strategic change, returning to focus on its main oil and gas business, as well as promising to sell assets and reduce spending. However, the company’s actions fell after a significant cut in the action repurchase program.
In a long -awaited strategic update, BP CEO Murray Achincloss abandoned the plan to reduce oil and gas production and, instead, promised a slight increase in production. It also reduced investments in renewable energy and started a strategic review of the Castrol lubricant business, which can be up to $ 10 billion if it is sold.
The changes aim to attract dissatisfied shareholders, including the Elliott Investment Management activist fund. However, the CEO was forced to slow down the pace of action repurchase, an important attraction for industry investors. While BP competitors maintain payments to shareholders, the London -based company will reduce its quarterly repurchase to a maximum of $ 1 billion, below the previous $ 1.75 billion.
BP shares fell 0.9%to 432.9 Pence at 11:04 in London time.
BP has faced strong pressure since Bloomberg earlier this month, he reported. The next activist background movement, known for its aggressive tactics and demanding drastic changes, including a wider output of low -carbon energy, will depend on how far the auchinclloss promises will.
After 13 months as CEO, this is the first major change of direction led by Auchinclloss. He assumed his position promising to continue the rapid transition to low -carbon energy initiated by his predecessor, Bernard Looney. However, after a 16% drop in shares last year, he pledged to “redefine the company’s strategy fundamentally”.
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“We set up something very convincing, which is a redefined strategy focused on the growth of upstream (exploration and production), while we cut spending in other areas to strengthen BP’s balance,” Auchinclloss said in an interview. “I believe that in the long run, investors will love it.”
BP will increase investments in oil and gas to about $ 10 billion per year, with the intention of raising production to 2.3 million to 2.5 million barrels of oil equivalent per day by 2030. The previous goal was Reduce production by 25% by the end of the decade compared to 2019 levels.
The company will reduce annual low -carbon energy investments to $ 1.5 billion to $ 2 billion, about $ 5 billion below the previous orientation. BP will continue to make “selective” investments in biogas, biofuels and electric vehicle charging.
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BP intends to sell about $ 20 billion in assets by the end of 2027, helping to reduce net debt to $ 14 billion to $ 18 billion compared to nearly $ 23 billion at the end of last year.
Two of BP’s new main goals are to increase cash flow by more than 20% per year by 2027 and raise returns on capital employed to over 16% in the same year. This requires a $ 70 Brent barrel price and a US natural gas price of $ 4 per million BTU, values near today’s levels.
“The renewed focus on hydrocarbons is positive for BP, as well as lower overall expenses and active sales,” Morningstar analyst Allen Good said in a statement. “However, there is still a little while, if any production growth, and BP’s repurchase rate has been significantly reduced.”
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If Elliott is not satisfied with BP changes, the hedge fund can push for changes in the board and management, people said familiar with Bloomberg earlier this week. President Helge Lund, known as one of the leading advocates of the now criticized zero net emissions strategy of the company, may face particular pressure.
“The board believes this is an important strategic redefinition for BP and is confident that, along with rigorous performance management, it will deliver improved performance and sustainable value to BP shareholders,” Lund said in a statement.
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