BP Faces Pivotal Moment as Activist Investor Elliott Enters Fray – Yahoo Finance
Source: Yahoo Entertainment
(Bloomberg) — BP Plc shares surged the most since 2020 after one of the world’s most aggressive activist investors built a stake in the company, seeking to end years of under-performance by pushing for significant change.
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Elliott Investment Management, led by Paul Singer, has amassed a significant holding in the British energy giant, Bloomberg reported on Saturday. This is typically the first step in a playbook it has deployed successfully at many other big public companies. Over the years, the fund’s efforts have led to strategy shifts, CEO departures and even corporate breakups.
“We think any activist would call for a change in the chairperson at the very least,” said RBC Europe Ltd. analyst Biraj Borkhataria. BP could also be urged to sell low-carbon assets and focus on growing oil and gas production, analysts at Jefferies Ltd. said in a note.
Shares of the company rose as much as 8.2%, and were up 6.6% at 461.7 pence as of 11 a.m. in London trading.
Elliott’s intervention comes after BP stumbled through a series of missteps over the past 15 years, from the Deepwater Horizon disaster to former Chief Executive Officer Bernard Looney’s sudden dismissal for his personal conduct. Since his faulty bet in 2020 that global oil consumption had peaked and the world was accelerating toward net zero emissions, the company’s valuation has lagged other oil majors.
Several of those rivals have been running the numbers over what a takeover might look like, according to people familiar with the matter. It’s not clear whether any are seriously considering a move, but that such deliberations are happening is an indicator of how far the London-based behemoth has fallen.
Over the previous five years, BP shares had dropped almost 8%, compared with a gain of about a third for its closest rivals Shell Plc and TotalEnergies SE.
Elliott is seeking to boost shareholder value by pushing BP to consider transformative measures, according to people familiar with the matter, who asked not to be identified because the discussions were private. It believes the company is significantly undervalued and its performance is disappointing, they said.
Representatives for the activist investor declined to comment, and the exact size of its stake couldn’t be immediately learned. But its track record gives an indication of the kind of pressure that might be faced by BP’s current CEO, Murray Auchincloss.
The 54 year-old Canadian stepped up to lead BP after Looney was abruptly fired, taking the role on a temporary basis in September 2023 then permanently in January 2024.
Since then, the former finance chief has kept a low profile, taking steps to reshape the company internally but saying little publicly. He has been gradually watering down Looney’s pivot away from oil by negotiating access to some of the largest crude reserves in the Middle East, spinning off renewable energy assets, and most recently pledging to lay off about 5% of the company’s permanent employees.
This wasn’t enough for some analysts and investors, who see the narrow window to reset the direction of the company coming to a close. A strategy update scheduled for this month is seen as a crucial moment for Auchincloss, so it didn’t help matters when the event was delayed by two weeks to Feb. 26, and moved from New York to London, to allow the CEO to recover from an undisclosed medical procedure.
Elliott could push BP on five fronts, according to Jefferies International Ltd. analyst Giacomo Romeo. These include a refocus on traditional oil and gas, leaving low-carbon activities, monetizing assets that can attract higher multiples such as infrastructure and retail components, maximizing free cash flow generation by reducing capital spending, and increasing the pace of divestments. The activist could also push for board and management changes, including the removal of BP’s chairman.
Auchincloss is already expected to put greater focus on the core oil and gas business, with less emphasis on renewable energy. But there are many questions about whether BP has the resources to accomplish such a pivot quickly, and whether investors still have patience.
Elliott certainly isn’t known for a wait-and-see approach, and there are many levers the fund could pull to force a more rapid shift.
BP’s management team and board of directors has changed little since Looney’s era, potentially making it a target for Elliott. Chairman Helge Lund is known as an architect of the company’s net zero strategy alongside the previous CEO.
At other companies, Elliott has successfully campaigned for a breakup. An entity the size of BP offers plenty of possibilities, but its core oil and gas business has highly integrated value chains — with everything from the wellhead to re
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