LONDON: British energy giant BP launched a major pivot back to its more profitable oil and gas business on Wednesday (Feb 26), shelving its once industry-leading targets on reducing carbon emissions and slashing clean energy investment.
The strategy overhaul comes after a difficult trading year for BP, which is under pressure from investors to boost its share price as countries look to slash emissions.
“We are reducing and reallocating capital expenditure to our highest-returning businesses to drive growth,” chief executive Murray Auchincloss said in a statement ahead of a presentation to investors in London.
“This is a reset BP, with an unwavering focus on growing long-term shareholder value,” he added.
To the dismay of environmentalists, the group will cut cleaner energy investment by more than US$5 billion annually, while retiring targets on cutting emissions.
BP on Wednesday claimed it had reduced emissions by more than expected. Its carbon-cutting targets, announced in 2020, had stood out at the time as one of the most ambitious in the industry.
EXPENDITURE AND COST CUTS
BP aims to spend between US$13 billion and US$15 billion annually through 2027, trimming US$1 billion to US$3 billion from 2024 levels, with 2025 capital expenditure expected to be around US$15 billion.
It plans to raise its dividend by at least 4 per cent per share annually and expects first-quarter share buybacks of US$750 million to US$1 billion, a downward revision from its previous US$1.75 billion forecast.
BP shares closed 1.37 per cent lower at 430.90p, slipping below the levels seen before reports emerged early this month that Elliott had built a significant stake in the company.
“The updated guidance directionally all looks in line with expectations, however we think the capex cut was less material than many investors were suggesting to us, while in the near term, shareholder returns for BP are now lower than peers,” said RBC Capital Markets analyst Biraj Borkhataria.
“To us, much of the release looks to be BP making the right calls for the long term, but it may not please investors today,” Borkhataria added.
BP also said it was reviewing its lubricants business, Castrol, and targeting US$20 billion in divestments by 2027.
It plans to bring in a 50 per cent partner for its solar business, Lightsource BP, with a sale process expected in the next few months.
