This is an article in yesterday's UK Times. I have copied it here in full, rather than the link because it is behind a paywall.
From net zero to year zero. The BP boss Murray Auchincloss, promised a “fundamental reset” and, at least on paper, he’s delivered. But only at the cost of blowing up his own credibility and that of the chairman Helge Lund.
How can anyone have any faith in this duo? In turning BP back to petroleum, they’ve just delivered a complete strategic U-turn on what they jointly presented five years ago — and without so much as an apology. Worse, the shareholders are going to have to pay for it again, with the penny finally dropping that BP cannot afford share buybacks of $1.75 billion a quarter — only able to manage as little as $750 million.
As if investors haven’t suffered enough already. Since the last big strategic extravaganza in August 2020, BP shares have lagged all their major peers, including Shell by about 65 per cent and Exxon Mobil by more than 100 per cent.
In their defence, the pair could say that the key architect of 2020’s strategy shift from “international oil company” to “integrated energy company”, complete with a target 40 per cent cut in fossil fuel production by 2030, has since left: Auchicloss’s sacked predecessor, Bernard Looney. Yet, on the day, it was Lund who introduced BP’s new “financial frame” allowing the group to “significantly increase our investment in low-carbon activities in this decade”. And, when quizzed by a Bernstein analyst on the likely returns from the likes of wind farms, the then-finance chief Auchincloss said: “Returns on alternatives are obviously something that people are quite worried about — we’re not.”
True, Looney later reined back the cut in oil and gas production to 25 per cent by 2030. But since then Lund has had his chance to shift tack in hiring Looney’s successor. Instead he opted for the continuity candidate in Auchincloss. And the man in charge since September 2023 had his opportunity a year ago. Instead he merely said he’d be “more pragmatic”, while promising $14 billion of buybacks in two years.
And now, with the Elliott hedge fund breathing down their necks, up pop the duo with an overdue about-face. BP will now increase oil and gas production, with investment in greenery pruned to as little as $1.5 billion a year: more than $5 billion less than previous guidance. On top, capex will fall by $2 billion-ish a year to about $14 billion; there’ll be $20 billion of asset sales, starring Castrol lubricants, which could fetch $10 billion; and a big jump in cost cuts by 2027 of up to $5 billion.
In the blizzard of figures, two things stood out. First, there was no real sense of a compelling strategy: a differential that would make BP the go-to investment in the sector.
• What does BP stand for now?
Second, that in promising, by 2027, extra operating cashflow of up to $4 billion and net debt down from $23 billion to $14 billion, Auchincloss has given himself little leeway for market shocks. BP is banking on oil and gas prices no lower than today — $70 a barrel for oil, $4 for Henry Hub gas — and better refining margins, $17 a barrel.
Worse, in lurching from one strategy to another, isn’t there a risk BP has over-corrected? Yes, President Trump’s “drill, baby, drill” mantra is back in vogue — but global warming hasn’t gone away. BP wasn’t wrong to spot a societal need for a long-term shift to renewable energy. It was the cack-handed way it went about it, as its writedowns on US offshore wind testified.
Anyway, here’s the market’s verdict on BP’s reverse-ferret: shares down 1.4 per cent to 431p, not helped by the shrinking buyback. Ask Auchincloss if a total U-turn is a credible position for a chief executive and he ducks the question, saying: “I feel good about the strategy.” That’s the problem: he also felt good about the last one.