Hedge fund calls on bp to increase oil and gas investment, cut renewable spending

Nishant Kumar and Laura Hurst, Bloomberg January 29, 2024

(Bloomberg) – Hedge fund Bluebell Capital Partners called on bp Plc to bolster investments into oil and gas and cut spending on renewable energy, saying the company’s shift away from fossil fuels is misguided and weighing on the share price.

bp CEO, Murray Auchincloss

bp should spend $1.5 billion a year more through 2030 on oil and gas production and halt any further investment in renewables and power, the London-based investment firm said in an October letter to Chairman Helge Lund that was seen by Bloomberg. It reiterated its demands in another letter on Jan. 26.

The activist campaign adds to pressure on bp’s new chief executive officer, Murray Auchincloss, named this month to replace the architect of the strategy shift, Bernard Looney. Bluebell, known for agitating for change at Danone SA, said it would have called for Looney’s resignation had he not left in September after admitting he’d failed to fully disclose past relationships with colleagues.

bp’s strategy is flawed because the company is aiming to cut fossil fuel output to support a global objective of having net zero carbon emissions by 2050, a policy goal that is increasingly unrealistic, the hedge fund said.

“bp is preparing to operate in a world that bp should know will not exist,” Bluebell’s co-founders, Giuseppe Bivona and Marco Taricco, wrote in the October letter.

The firm urged the company to reduce cumulative investment in bioenergy, hydrogen and renewables & power by $28 billion through 2030.

bp’s stock is worth at least 50% more than the current price, and the discount is mostly due to the strategy of shrinking oil and gas, Bluebell said, while “rapidly promoting a risky diversification into sectors with lower targeted returns and where bp has ‘no right to win’ on the other.”

“bp welcomes constructive engagement with our shareholders,” the company said in a statement. “We have met with most of our major shareholders recently and continue to receive support for our strategy. We continue to make significant progress, remain focused on delivery, and are confident the strategy will grow the value of BP and deliver sustainable long-term value for shareholders.”

bp shares rose 1.5% to 468.65p at 9 a.m. in London. The Financial Times reported the Bluebell letter earlier.

Many analysts welcomed Auchincloss’s appointment and the continuity it represented for bp’s energy-transition strategy. Yet he faces skepticism from investors that he can solve the company’s long-term challenges, which include a wide valuation gap with U.S. peers and questions about the sustainability of share buybacks.

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