BP’s Chief Executive, Murray Auchincloss, is set to announce a significant shift in strategy, scrapping the company’s ambitious target to increase renewable generation capacity 20-fold by 2030. This decision comes as BP seeks to address investor concerns over its earnings performance.
Key Highlights:
Change in Strategy:
BP will abandon its goal of growing renewable generation capacity to 50 gigawatts by 2030, a target initially set to increase from 8.2 GW of renewable capacity, including 926 megawatts of wind generation in 2019.
The company has also dropped its target to cut oil and gas output by 2030, which was previously set to a 40% reduction under former CEO Bernard Looney but was later revised to 25%.
Investor Pressure:
BP’s shares have lagged behind competitors, prompting the need for a strategic overhaul. The company is under pressure from activist investor Elliott Investment Management, which has acquired nearly 5% of BP’s shares and is advocating for tighter cost controls and a reduction in green energy spending.
Elliott is pushing for BP to divest assets related to wind and solar energy and to consider selling its Castrol lubricants and service station networks to unlock value.
Financial Adjustments:
BP will shift from a target of $49 billion in core earnings (EBITDA) this year to an annual percentage growth target instead. Analysts estimate that BP may announce cuts to its low-carbon capital expenditure by $2-$3 billion, reducing its annual spending from $16.24 billion.
Market Context:
The energy sector has seen major companies reverting to oil and gas investments as fossil fuel prices recover from pandemic lows. The political climate, particularly with the re-election of U.S. President Donald Trump, a known advocate for fossil fuels, has further influenced this shift.
Upcoming Announcements:
The capital markets day, initially scheduled for February 11 in New York, was moved to Wednesday in London due to Auchincloss needing a medical procedure. During this event, BP is expected to publicly outline its new strategy, including plans for asset divestiture and cost-cutting measures.