The oil company’s shares are down 19 per cent since chief executive Murray Auchincloss unveiled his big revamp
The Times
Much more of this and it’ll be time for another “fundamental reset”. BP’s latest one has been running for two months now. And look what a success it’s proving: a further miss on the profits front, a sharp slide in operating cash flow and net debt up instead of down, $4 billion higher at $27 billion.
As for the shares, it’s best not to look. They’re down another 2 per cent to 353¼p on the first-quarter results. Or 19 per cent since chief executive Murray Auchincloss unveiled his big revamp, promising an “unwavering focus on growing long-term shareholder value”.
True, no one should read too much into one set of quarterly figures. And Auchincloss has not had the easiest backdrop: Trump tariff mayhem and recession fears that’s left the oil price at $65 a barrel against the $70 on which his financial promises are pinned. Yet it’s the same for everyone and since BP’s reset in February, Shell and TotalEnergies are each down 9 per cent and ExxonMobil by 1 per cent.
The market’s verdict is clear. And that’s before the daily secret squirrel briefings from sources close to Elliott: the hedge fund getting lots of airtime for an investor that owns a mere 100 shares in BP, what with its 5 per cent stake almost entirely in equity swap derivatives. But you get where it’s coming from. BP’s ho-hum reset is far from convincing.
Take the latest nonsense with the share buyback. Yes, it’s been shrunk to $750 million, $1 billion less than the last one. But BP can’t afford even that: it’s been funded by raising the net debt Auchincloss says he’ll cut to no more than $18 billion by 2027. As Citi analysts noted: “We are confused as to why the company continues to buy back any equity.”
His response? Broadly his “trust me, guv” routine. Yet that would work far better if, for example, he hadn’t massaged down profit expectations at April 11’s trading update and then produced another miss: profits halving to $1.38 billion versus analysts’ reduced forecasts of $1.53 billion, mainly due to a “weak gas marketing and trading result”. Or come up with a 44 per cent drop in operating cash-flow to $2.8 billion, due to a seasonal $3.4 billion uplift in working capital. Maybe it’ll all unwind. But who knows?
Auchincloss says he “can’t focus on the share price”, pointing instead to “great operational performance”, including “over 95 per cent upstream plant reliability” and “six exploration discoveries”. But cutting net debt looks dependent not on BP operations but stuff beyond his control: a decent price, say, for the lubricants arm Castrol, on the block for $10 billion. And while Elliott’s calls for faster cost cuts, less capex and $20 billion of free cash flow by 2027 could sound like scorched-earth financial engineering, there’s no evidence yet that Auchincloss is on top of less ambitious targets.
BP’s lurch away from the net zero nirvana of ex-boss Bernard Looney has done for chairman Helge Lund and now strategy chief Giulia Chierchia. Yet the third backer of Looney’s pricey shift greenwards was his successor Auchincloss, who’s now trying to persuade investors he can pull off a U-turn. Unless he starts to deliver better figures than the last lot, he’ll be over a barrel.