BP is showing signs of a pivot back toward oil and gas that should boost returns, but is doing it too quietly to benefit its share price, according to activist investor Bluebell Capital Partners.
Four years into its plan to shift away from fossil fuels, BP (LON:BP) is under increasing pressure from some shareholders to raise its profitability and narrow the valuation gap with more oil-focused US rivals.
Bluebell co-founders Giuseppe Bivona and Marco Taricco, who have led high-profile campaigns against corporate giants such as Danone and Bayer, turned their sights on the energy company late last year, demanding a greater emphasis on its core business.
BP should bolster investments in oil and gas, cut spending on expensive renewable energy projects such as offshore wind and return more money to shareholders, Bluebell said in an October letter. The London-based company showed signs of moving in this direction in its Feb. 6 earnings presentation, the first since Murray Auchincloss was permanently appointed to the position of chief executive officer, Bivona said.
“It looks like BP is already prepared to do, or is planning to do, a lot of the things we’re asking, including increase oil and gas production,” Bivona said in an interview. But this shift will not benefit investors “if the company does not clearly say so.”
© BloombergSpeaking to analysts after fourth-quarter earnings that surpassed expectations, Auchincloss emphasized that he would follow a “pragmatic” and “flexible” approach to the energy transition that keeps pace with broader societal needs.
He downplayed the possibility of doing further multibillion-dollar acquisitions — after a number of large deals focused on low-carbon energy — and said BP’s oil production could rise beyond the expected 2% to 3% targeted for 2027.
Yet he also reaffirmed BP’s commitment to the ultimate goal of net zero emissions, saying the company’s “destination remains unchanged.”
For Bivona, BP’s unwillingness to talk out loud about what he perceives as a shift in strategy is keeping a lid on its share price.
The stock won’t move higher “unless BP say clearly to the market what their plans are,” Bivona said. If they don’t lay out where they’ll scale back investment plainly “they are deliberately depressing the share price.”
Bluebell only has a small stake in BP, but Bivona said he has spoken to several top 40 shareholders, the majority of whom share his concerns on the under-performance of the company’s shares and back the fund’s proposals for a shift in strategy.
After a meeting with BP Chairman Helge Lund and interactions with the company’s investor relations department, the door to engagement with the major seems to have closed, Bivona said. Head of Investor Relations Craig Marshall wrote to the fund in February, acknowledging its most recent letter but saying it had “nothing further to add to the comments we have made to you and in public.”
Auchincloss has said he has no plans to speak to Bluebell personally and “the shareholders I talk to are very supportive of our strategy.”
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