Under pressure from an activist investor and a sagging share price, the chief executive officer of energy giant BP (LON: BP) has pledged to return his company to its roots in oil and gas and do “fewer things, with better returns.”
Speaking at CERAWeek by S&P Global on Tuesday, a major energy conference in Houston, U.S., Murray Auchincloss decided to big up his February reset of the company. The move followed news of activist investor Elliott Investment Management having taken a near-5% stake in the company.
In his renewed focus on oil and gas basics, Auchincloss flagged two key regions for growth – the US and the Middle East. “We were focusing on too many things over the last five years. So, we had to optimize and balance the portfolio and refocus. We’re back to our roots in the Middle East in terms of exploration, expanding in the UAE, Iraq, Libya and Oman.”
The BP boss also said he was bullish on the company’s prospects in the Gulf of “America”, where BP has 10 billion barrels of oil equivalent to develop and tap, alongside a “strong position” in the onshore Permian basin.
In 2024, the company produced 434,000 barrels of oil equivalent per day in its onshore U.S. shale operations, according to its full-year results.
BP currently aims to grow oil and gas production to the 2.3 million to 2.5 million boepd range in 2030, having scrapped a previous target to reduce output during the decade. It is a target the “U.S. will play a key role in,” Auchincloss said.
The BP board greenlighted the development of the Kaskida oilfield in the Gulf last year. The project is in a highly complex Paleogene geological structure where BP also plans to proceed with a second project, Tiber, this year, Auchincloss confirmed.
“We have a fabulous position here in the Gulf of America. In the Paleogene we have 10 billion barrels (of oil and gas resource) in place. We think this is the next wave of development in the Paleogene in the Gulf of America.”
“Additionally, commitments in India will continue in terms [oil and gas] exploration and natural gas supply in one of the world’s great growth markets.”
Being Smarter With Renewables
In January, BP announced 8,000 job cuts. The very next month, it announced plans to cut investments in renewable energy, and raise its annual spending on oil and gas to $10 billion, in a bid to improve investor confidence.
Auchincloss noted that renewables remain “important” for BP to stay in because its giant trading business needs a steady supply of electrons. However, the company will be “smart” and strategically redirect capital toward oil and gas moves that may potentially of offering higher rates of return, he added.
To this effect, BP has placed its offshore wind assets in a joint venture with Japanese utility JERA and plans to bring in a partner for its Lightsource solar business, Auchincloss said. “We we will also focus our capital on bio gas and carbon sequestration programs.”
The company’s portfolio optimization and rebalancing, when complete, would reflect “two priorities in all the markets BP operates in – affordable and reliable energy,” he added.
So far, the market’s response has not been upbeat. In the month since Elliott Investment Management’s stake in BP was revealed on February 13, the company’s share price has fallen by over 11%. It has also fallen by 6% since the company’s reset was unveiled on February 26.
However, Auchincloss said that the company’s shift in focus was finding favor with shareholders. “Over the past few weeks, I have met 40% of BP shareholders and they all seem pretty satisfied.”
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