BP is poised to overhaul its "Beyond Petroleum" strategy, signaling a significant pivot from its previous commitments to renewable energy. The company plans to slash investments in renewables by more than half, redirecting its focus towards boosting oil and gas production. This strategic shift, described by BP's chief executive Murray Auchincloss as a "fundamental reset," aims to address the company's recent underperformance and potential takeover speculations. In light of declining net income and competitive market valuations, BP is also contemplating moving its primary stock market listing to the United States.
BP's financial performance has been under scrutiny, with net income dropping to $8.9 billion in 2024 from $13.8 billion the previous year. Over the past five years, the company has managed a total return of 36% including dividends, yet faces mounting pressure to enhance shareholder value. The company has already initiated partnerships to offload parts of its renewable energy ventures, including placing its offshore wind business in a joint venture with Japan's Jera. BP is now seeking a similar partnership for its solar business.
The shift in strategy aligns with broader industry trends, as companies like Shell and Equinor have also scaled back their green energy investments. This move has been partly attributed to US President Donald Trump's encouragement of fossil fuel investments through his "drill baby drill" rhetoric. The potential relocation of BP's stock market listing to the US reflects the higher valuations commanded by oil and gas companies there.
However, this pivot has not been without controversy. A group of 48 investors has urged BP to allow them a vote on any plans to deviate from its renewable commitments. The concerns are echoed by Royal London Asset Management, which acknowledges BP's past efforts towards energy transition but remains wary of continued investments in fossil fuel expansion.
"As long-term shareholders, we recognise BP's past efforts toward energy transition but remain concerned about the company's continued investment in fossil fuel expansion." – Royal London Asset Management
Experts have noted that BP's intentions are less clear compared to its peers, emphasizing the need for decisive action to improve operational performance and share price standings.
"Other energy companies have been clearer about their intentions thus far than BP," – Russ Mould
"They need to prove to people that after a difficult operational and share price performance compared to their peers, that they're looking to do something about it, not just let things drift along," – Russ Mould
This strategic reset comes amidst a backdrop of increasing calls for government policies to prioritize renewable energy, especially as extreme weather events challenge current insurance models and fiscal planning.
"Government policies will also need to prioritise renewable power, and as extreme weather puts pressure on insurance models – policymakers will be looking to fossil fuel profits as a way to fund extreme weather recovery." – Charlie Kronick