The Case for Breaking Up BP PLC
BP PLC has consistently underperformed its peers, with its stock price trending downward since its peak in 2007. The company's latest financial results only serve to underscore this trend, with fourth-quarter profits plummeting 61% compared to the previous year. Annual profits also took a hit, falling from $13.8 billion in 2023 to $8.9 billion in 2024. This decline can be attributed in part to lower oil prices and shrinking margins at its refining business, as well as the financial strain of its investments in low-carbon ventures.
Unfortunately, BP has lost its focus and core mission, and its attempts to diversify into low-carbon ventures have only added to its financial strain. As shareholders of BP, we have a vested interest in seeing the company return to its core competencies and achieve long-term success. In 2021, Murphree Investment Group (MIG) approached BP about exploring possible spin-offs and asset sales, but our proposal was met with resistance.
In our view, the best solution for BP is to undergo a strategic break-up and merger. We propose spinning off the company's midstream and downstream North American assets into a separate entity, Amoco, to be headquartered in Houston, Texas. This would allow Amoco to focus on its core business and operate more efficiently, while also providing BP with a much-needed injection of capital. Additionally, we recommend selling the low-carbon renewable energy assets to private equity or merging them with another low-carbon renewable energy company. This would allow BP to exit a business that is not core to its operations and focus on its traditional strengths. Finally, we suggest merging the company's exploration and production assets with Shell, given the synergies and cost savings that could be achieved through a combination of the two companies, both of which are headquartered in London.
We believe that a break-up and merger is the best way forward for the company, and we urge BP's management to reconsider our proposal and take bold action to restore the company's fortunes. By doing so, we are confident that BP can return to its core competencies, achieve long-term success, and provide strong returns for its shareholders.