BP ramps up fossil fuel spending and rows back on green targets
BP will dial up its spending on oil and gas by $10bn (£7.9bn), slash its investment into renewable energy and offload $20bn of underperforming assets as part of a major strategic overhaul that aims to boost its beleaguered share price.
In a much anticipated – and delayed – announcement from boss Murray Auchincloss, the British petrochemical giant told shareholders on Wednesday that it would no longer hold itself to the ambitious transition goals it set itself set five years ago.
Under Auchincloss’s predecessor, BP pledged in 2020 to reduce its oil and gas output by 40 per cent and simultaneously ramp up its renewable target over the following 10 years. It also pledged eventually to become fully net zero by 2050.
But Wednesday’s announcement – made just a fortnight after activist investor Elliot Management took up £3.8bn stake in the London-listed oil major – represents a sharp departure from those goals, and brings the group’s energy mix closer in line to that of UK-rival Shell.
The group has faced mounting pressure from shareholders to bolster its more profitable oil and gas divisions at the expense of the renewable strategy set under former chief executive Bernard Looney.
Its share price has lagged well behind those of its main rivals, falling 14 per cent in the two years between 2023 and 2025. Shell’s share price jumped 10 per cent over that same period.
Auchincloss said: “Today we have fundamentally reset BP’s strategy. We are reducing and reallocating capital expenditure to our highest-returning business to drive growth, and relentlessly pursuing performance improvements and cost efficiency.”
BP pledged to take a knife to its renewable spending, reducing it by $5bn a year to between $1.5bn and $2bn.
It added it would sell $20bn of businesses over the next two years, which is likely to include lubricants firm Castrol. The offshoot was placed under strategic review as part of the announcement.
BP vowed to bolster its balance sheet through a debt reduction programme, seeking to reduce net debt from between $23bn to between $14bn and $18bn by 2023.
“This is a reset BP, with an unwavering focus on growing long-term shareholder value,” Auchincloss added.
BP’s share price had been steadily rising in the run-up to its capital markets day. As the group announced a weak set of full-year results two weeks ago, it jumped as much as 12 per cent as investors were buoyed by Auchincloss’s promise of a “fundamental reset” alongside the earnings announcement.
They also swelled 1.3 per cent in the trading hours preceding the announcement today.
But investors appear to have been underwhelmed by the detail revealed by the oil giant.
Shares plunged three per cent in the immediate aftermath of the overhaul becoming public, before recovering to slightly to just one per cent per cent down as of 11.45am on Wednesday.
Commenting on the decision, Maurizio Carulli, an energy analyst at Quilter Chevio, said: “BP’s strategy reset is encouraging and an important first step toward a much-needed refocusing of the company after a challenging year.”
“Furthermore, $20bn of divestments by the end of 2027 is being targeted, and will possibly include Castrol and the solar business Lightsource,” he added.
“These proceeds should then allow BP to reduce its debt burden and refocus the priorities of the group.
“The company could go further though to help assuage investors’ fears. Continued investments in hydrogen and carbon capture, albeit guided as limited, should be reconsidered for possible cessation given the challenges in achieving attractive returns in these areas.”