Elliott Management, the activist investor, has built a stake of almost 5% in BP (BP) and is pressing the oil producer to abandon its green investments, according to reports.
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The U.S. hedge fund, which has a position worth almost £4 billion, around $5 billion, wants the British oil major to cut back on renewables to focus on fossil fuels and improving returns to shareholders.
Sources told the Financial Times that Elliott is pushing BP to make large divestments and to cut spending on green energy projects.
Elliott’s position makes it the third largest shareholder in the company behind BlackRock and Vanguard. It would have to publicly disclose its position if it were to reach 5% of shares in the company.
Elliot reportedly wants BP to abandon plans announced in 2020 under previous CEO Bernard Looney to shrink the oil firm’s carbon footprint to net zero by 2050. That has seen BP spend significant amounts on a range of wind, solar, hydrogen and biofuel schemes, with its renewables investment hitting a high of $4.9 billion in 2022.
However, shares have lagged peers and investors have become concerned about the strategy under new CEO Murray Auchincloss. Before news of the Elliott stake broke shares had fallen over the preceding 12 months and were about 8% lower since the strategy from Looney was launched compared with a gain of about a third for Shell (SHEL) in that time.
BP Reacts to Activist
Reacting Elliott’s position, BP used its full-year results this week to pledge to “fundamentally reset” its strategy. The strategy changes are set to be announced at a highly anticipated investor day slated for February 26th.
Under Auchincloss the process of moving away from reducing oil production and boosting green energy has already begun, with the company scaling back renewables and spinning off its offshore wind business. Moreover, last month BP announced a 5% cut to its global workforce as part of efforts to deliver $2 billion in cost savings by the end of 2026.
In the last quarter, BP’s profit slid to $1.17 billion compared with $2.99 billion in the same period of last year. Annual profits fell to $8.92 billion from $13.84 billion in 2023, the worst performance since it lost $5.7 billion in 2020.
Is BP a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy consensus rating on BP stock, based on five Buys and six Holds and one Sell. After declining almost 5% in the last 12 months the average BP price target of $37.58 implies almost 9% upside to current levels.
