BP (BP) stock surged as investors cheered news that activist hedge fund Elliott Management had taken a stake in the oil major. Shares of BP (GB:BP) rose 7% in early trading in London on Monday, with news of the position fuelling speculation of a change of strategy and personnel.
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It comes just three weeks after BP said it would cut 5% of its global workforce as part of a cost-cutting drive as pressure grows on CEO Murray Auchincloss to arrest a decline in profitability and the share price. A highly anticipated investor day scheduled for this week was also delayed to February 26th so that Auchincloss could recover from a planned medical procedure.
Elliott Likely to Press Changes at BP
Elliott’s reputation as an aggressive activist investor means BP is likely to face pressure to make substantial changes, from an overhaul of its green bets to a shake up of the board.
Specifically, it is thought that the activist will push for removal of chairman, Helge Lund, who helped oversee the company’s controversial net zero strategy with previous CEO Bernard Looney.
Investors have been left unhappy since Looney made a failed bet in 2020 that global oil demand had peaked, driving the company towards a low-carbon strategy that has failed to pay off. Since then, shares have lagged peers significantly, declining about 8% in that time compared with gains of about a third for Shell (SHEL) and TotalEnergies (TTE).
Lund also oversaw the debacle of Looney’s sudden dismissal for personal conduct, and it’s felt that the board and management team has changed little since he was CEO.
“For BP, given the circumstances around the changes to its previous CEO, we think any activist would call for a change in the chairperson at the very least,” RBC analysts said in a note.
Elliott could also press for divestment of clean energy business segments, a process that has already partially begun under Auchincloss. He spun off the company’s offshore wind business in a joint venture and is looking to offload BP’s onshore wind business, too.
It’s thought BP’s other clean energy assets such as Lightsource, a solar energy and battery storage unit, could be a target for Elliott, whose intentions so far remain unclear.
BP is due to report Fiscal fourth-quarter results on Tuesday, with the company having already flagged weakness in production and refining margins.
Is BP a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy consensus rating on BP stock, based on three Buys and six Holds. After declining almost 5% in the last 12 months the average BP price target of $36.10 implies almost 12% upside to current levels.
