UK-based oil and gas company BP is shifting its strategy away from renewable energy targets and refocusing on fossil fuels.
The move aims to address investor concerns over earnings and follows the company’s underperformance in recent years compared with rivals such as Shell, Exxon and Chevron.
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At the company’s capital markets day today (26 February), chief executive, Murray Auchincloss, informed investors that BP went “too fast” on the energy transition.
Under Auchincloss’ predecessor, Bernard Looney, BP pledged in 2020 to cut oil and gas output by 40% while rapidly growing renewables by 2030. However, the reduction target was lowered to 25% in 2023, and BP’s current renewable generation capacity stands at 8.2GW.
The company is now no longer planning to reduce its oil and gas output by 2030, with 10 major new projects now planned. It has also cut annual funding for renewables by $5bn to $1bn-$2bn.
Since taking the helm, Auchincloss has slowed investments in renewables, announced cost-cutting measures and planned a 5% reduction in staff.
The company failed to reach its 2024 earnings before interest, taxes, depreciation and amortization (EBITDA) target of $40.9bn (£32.3bn) and will now set an annual percentage growth target rather than a fixed dollar amount. Capital spending for 2024 was reported to be $16.24bn.
BP also plans to divest assets and cut other low-carbon investments to reduce debt and boost returns.
This decision aligns with a broader trend in the energy sector of companies refocusing on oil and gas due to improved returns amidst rising fossil fuel prices, the report said.
The strategy shift also comes amid pressure from Elliott Investment Management, which has built up a nearly 5% stake in BP and is calling for an overhaul, including tighter cost discipline.
Elliott has a history of pushing for changes at companies such as Honeywell and Southwest Airlines.
A source familiar with the matter indicated that Elliott wants BP to scale back green energy spending and consider selling assets such as wind and solar farms.
It also suggested that BP could benefit from divesting its Castrol lubricants and service stations to unlock value and boost share buybacks.
