Ever since John Browne vowed to turn BP green some 25 years ago, the British oil giant has experienced a series of embarrassing mishaps. That includes major safety lapses, such as a massive oil spill in the Gulf of Mexico, and the departure of several bosses. Yet its biggest blunder has been the bungled attempts to profitably decarbonise its business, which were made all the worse by its premature promise to go “beyond petroleum”.
The most recent illustration of BP’s woes came in its quarterly earnings report on February 11th. The firm revealed that fourth-quarter profits dropped by 61% compared with the previous year. Annual profits fell from $13.8bn in 2023 to $8.9bn in 2024 in part because of lower oil prices and shrinking margins at its refining business. BP’s investments in low-carbon ventures added to the financial strain. The dismal results coincided with reports that Elliott Investment Management, an aggressive activist hedge fund, has taken a substantial stake in the oil giant.
Neither party has commented on the matter, but the rumours were sufficient to lift BP’s share price, suggesting that shareholders are deeply frustrated with its management. Even after the gain, however, the company’s market value, of $90bn, is lower than that of Shell, its European rival.
Murray Auchincloss, BP’s boss, has felt the pressure. He has said that he will unveil a strategy to “fundamentally reset” the company at an investor event on February 26th. What might such a makeover entail? BP’s renewables ventures seem to be squarely in the crosshairs. Elliott’s past interventions at American energy firms suggest that it will push for financial returns rather than carbon concerns. Irene Himona of Bernstein, a broker, argues that “BP’s undervaluation needs a ‘Shell-like’ strategic shift.” Wael Sawan, Shell’s boss, has already cut investment in underperforming green areas, like hydrogen, and boosted spending on oil and gas.
Profitable hydrocarbon assets may be sold, too. Michele Della Vigna of Goldman Sachs, a bank, thinks that the “convenience and mobility” division, which includes lubricants and retail sites at petrol stations, is worth an eye-catching $48bn. The funds raised could be spent on lucrative upstream prospects, such as BP’s fast-growing shale assets in America, or on share buybacks, which tend to please investors.
A bolder idea still is that BP lists in New York instead of London. The financial case is compelling. BP and Shell trade at roughly eight to nine times earnings compared with 14 times for ExxonMobil and Chevron, two American oil giants. European majors face valuation penalties for underperforming renewables investments. They also miss out on flows from passive funds which track big indexes such as the S&P 500.
Even though it would be politically challenging, in some ways relocation could suit BP. Analysis by Mr Della Vigna reveals that BP is even more Yankee than Exxon. It derives roughly half its profits from the United States (see chart). And the country is also home to many of bp’s most promising assets—from those in the Permian basin to the Gulf of Mexico. The firm that started life as the Anglo-Persian Oil Company could end up looking like an American-Permian petroleum firm instead. ■
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