BP Pledges Strategy 'Reset' as Activist Elliott Builds Stake

BP Plc pledged major changes at its upcoming strategy update after reporting a sharp drop in profit, as the company seeks to reverse a prolonged period of under-performance that has now drawn in activist Elliott Investment Management.

“We now plan to fundamentally reset our strategy and drive further improvements in performance, all in service of growing cash flow and returns,” Chief Executive Officer Murray Auchincloss said in a statement on Tuesday. “It will be a new direction for BP, and not business as usual.”

The Feb. 26 strategy update has long been seen as a crucial test of Auchincloss’s vision for BP, even before Bloomberg reported that Elliott had built up a stake. After several years of falling further behind peers, investors want to see significant changes at the company. 

BP shares rose 0.6% to 467.7 pence as of 8:01 a.m. in London. 

While most major oil companies posted lower earnings in the fourth quarter due to falling energy prices, BP alone is expected to reduce share buybacks to bolster its weaker balance sheet. The London-based energy giant said it will outline plans for 2025 investor returns at the strategy update. 

BP’s adjusted net income for the fourth quarter was $1.17 billion, down from $2.99 billion a year earlier and missing the average analyst estimate of $1.3 billion. Net debt fell to $23 billion, down from $24.3 billion three months earlier.

The company reaffirmed its plan to repurchase $1.75 billion of shares in the current quarter, matching the pace seen in prior periods. RBC analyst Biraj Borkhataria predicted BP would cut this figure. “Relative to market expectations, the forward-looking guidance looks a little soft,” he said in a note. 

The downstream business, which includes refining and selling fuel to customers, lost $302 million on an adjusted basis, according to the statement. The company expects refining margins to remain low in the first quarter. 

BP’s large but opaque trading business, which has often helped the company ride out periods of market weakness, didn’t come to the rescue this time. The contribution was weak for oil trading and average for natural gas, according to the statement. 

While Elliott’s full plans for its BP investment are yet to be learned, news of its stake in the company had a big effect on shares, which rose 7.4% on Monday, the most in two years. Analysts speculated the fund could push for change to the company’s board, encourage it to sell low-carbon assets and focus on growing oil and gas production. 

Since 2020, Elliott has targeted nearly 80 companies, roughly 95% of which saw their shares rise on the day it became known the activist had built a stake, according to data compiled by Bloomberg. These increases have also turned out to be long-lasting, with over two-thirds of the targets holding their advances a year later, with an average gain of more than 35%.