BP: The U-turn
The oil giant BP has been investing persistently in renewable energies for many years. The British initially invested large sums in projects whose economic viability was clearly questionable. This has made BP one of the leading players. Now that renewables are competitive in many areas, the CEO has an idea...
In future, BP will focus more strongly on its core business of oil and gas. At the same time, investments in renewable energies will be drastically reduced, as BP CEO Murray Auchincloss explained on Wednesday at the London-based company's capital markets day. The move is intended to appease investors who have recently been disappointed and help the share to recover after a poor run.
BP wants to invest around 10 billion US dollars annually in the oil and gas business. Oil production is to increase to 2.3 to 2.5 million barrels of crude oil equivalent per day by 2030. Meanwhile, annual investments in renewable energies will fall significantly to 1.5 to 2 billion dollars. Investments in the energy transition will only be made very selectively. In addition, assets worth around 20 billion dollars are to be sold by the end of 2027 in order to reduce debt. For example, and as expected, the lubricants division Castrol is under scrutiny.
BP CEO Auchincloss is thus making a 180-degree turn after his predecessor Bernard Looney wanted to significantly expand renewable energies. In 2020, BP set the goal of reducing oil and gas production by 40 percent by 2030 in favor of renewable energies. At the beginning of 2023, the target was initially revised to 25 percent. Last year, BP made significantly less profit than in 2023.
The change of plan is also likely to be related to the US hedge fund Elliott Management. At the beginning of the month, the news agency Bloomberg reported that Elliott had acquired a larger share position and holds almost five billion dollars in BP. According to media reports, the investor is pushing for more investment in oil and gas again. This also corresponds to the policy of US President Donald Trump. If the change of strategy does not convince the activist investor, Elliott could push for changes in management, Bloomberg reported, citing people familiar with the matter.
However, there is also resistance to the plans, true to the motto "back to the past".
Clearly, a strategy geared towards short-term returns could initially have a positive effect on the share price. And of course it is also entirely possible that oil and gas will be needed for much longer than is actually hoped in view of climate change. But too one-sided investments in oil and gas simply put a company of this size at too great a risk. After all, the global player BP wants to remain one of the leading energy companies in the coming decades. And in this respect, the British are in clear danger of losing touch with broader-positioned competitors such as TotalEnergies or Shell. Nevertheless, the following still applies: Anyone who is on board with the cheaply valued dividend pearl can still stay. The stop price should be left at EUR 3.50.
Contains material from dpa-AFX
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