BP Asks Shareholders to Pay for Its Mistakes

For the last five years, BP Plc has squandered its shareholders’ money. That’s why, forced by poor returns and the arrival of an activist investor, it finally “reset” its strategy on Wednesday. The problem? The British oil major sent its investors the bill for the damage.

With that approach, who would want to buy its stock and a become a long-term holder? The answer is obvious: very few.

The company, a shadow of its former might, had one job on Wednesday: Give investors a reason to buy its stock. It’s early hours, but I don’t see much to trigger that move. BP needed to demonstrate it’s a better custodian of value than its rivals. I don’t think it did. There’s better value elsewhere, namely at Chevron Corp. and Shell Plc.

While BP finally admitted that its five-year old strategy of shifting away from oil and gas into renewables has failed, its pledge to cut operating costs, sell some assets and cut debt while increasing fossil-fuel production were too little, too late; and way too punishing for shareholders. The quarterly share buyback program will be reduced to as little as $750 million, down nearly 60% from $1.75 billion currently. The dividend will continue to grow, but the company anchored its financial framework around unrealistically high prices.

For BP to deliver, it needs Brent crude to average at least $70 a barrel – using 2024 real term prices. Add inflation, and that equals to nearly $72 a barrel in today’s money. Look at your screen, and Brent is almost there now. BP has zero room of maneuver if oil prices were to fall. Its natural gas price is even worse. BP is betting on $4 per million British thermal unit for the US gas benchmark, based on 2024 real prices. Update that to 2025 prices and the market is already below the assumption. The refining margin BP has penciled in -- $17 a barrel – is much higher than current margins of less than $15 a barrel.

Those numbers should worry rather than reassure anyone looking at putting their money into BP. The board of directors had a great opportunity to “reset” when it fired Bernard Looney, the previous chief executive officer and architect of the shift to green in 2023. Instead, it opted for continuity and installed Looney’s number two, Murray Auchincloss, as the new boss.

BP needed to announce a 180-degree course correction with its strategic update. Yet, it did something that looks like 90 degrees. More a L-turn than a U-turn. Although it’s scaling down its bet on renewables, BP isn’t leaving the sector. Although it promised to sell some assets, it’s not selling enough.

Yesterday, I wrote that this was BP’s last chance. As it did with its investors’ money for the last five years, it squandered the opportunity. Shareholders should take over the matter.

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