Elliott Management, BP’s third-largest shareholder, is urging the oil giant to reduce its investment in renewable energy and prioritize shareholder returns. This push comes as BP’s share price has underperformed and investors express concerns about the company’s green energy strategy.
Elliott Management, a US hedge fund run by billionaire Paul Singer, has acquired a nearly 5% stake in BP, valued at £3.8 billion. This makes Elliott the third-largest investor in BP, trailing only BlackRock and Vanguard. The hedge fund is reportedly advocating for a series of divestments to unlock value for shareholders.
A significant shift in strategy would be a reversal of the course set by former CEO Bernard Looney, who championed substantial investments in renewable energy sources such as wind, solar, biofuel, and hydrogen. BP’s green energy investments have surged since 2020, rising from 3% of total spending to 30%, or $4.9 billion annually.
Recently, BP announced a halt to all new green energy investments, although it stopped short of confirming spending cuts. This announcement follows a 39% year-on-year decline in BP’s profits and a long-term decline in its share price, which has fallen by a third since its peak in 2006.
Elliott Management contends that BP’s investments in green energy ventures have yielded poor returns, contributing to the company’s undervaluation. A source close to Elliott emphasized the need for significant change, stating that “the time for minor course corrections at BP is long gone.”
Following news of Elliott’s stake acquisition, BP’s share price experienced a temporary surge. CEO Murray Auchincloss subsequently announced a “fundamental reset” of the company’s strategy, signaling a renewed focus on oil and gas and the potential sale of wind farm assets.
Mr. Auchincloss is expected to provide further details about this strategic reset at BP’s capital markets day later this month. Elliott Management, spearheaded by energy investment specialists John Pike and Gaurav Toshniwal, anticipates strong support for the revised strategy from BP’s board and chairman. Both Elliott and BP have been contacted for comment.
In conclusion, Elliott Management’s pressure on BP to curtail renewable energy spending underscores the growing tension between investors seeking short-term returns and the long-term transition to cleaner energy sources. The outcome of this conflict will significantly impact BP’s future direction and potentially influence the broader energy industry. BP’s upcoming capital markets day will be crucial in revealing the full extent of the strategic reset and its implications for the company’s long-term sustainability goals.
