An investor group has stated that BP PLC needs to demonstrate how its decision to prioritize increased investment in oil and gas will create value for shareholders. A coalition of funds managing £191 billion (approximately $260 billion) in assets has submitted a special resolution, demanding that BP explain how it will "drive a disciplined approach to capital expenditure" and how it will assess whether each new oil and gas project can generate acceptable returns. Members of this coalition include pension funds from the UK and Europe, as well as the Australasian Centre for Corporate Responsibility.
BP's long-term underperformance relative to other major oil companies is partly attributed to the strategic shift away from fossil fuels and towards low-carbon businesses under former CEO Bernard Looney in 2020. These green investments are now being gradually scaled back, potentially leading to impairments of up to $5 billion in its energy transition business in the fourth quarter.
BP has indicated it will increase oil and gas investment to approximately $10 billion annually, while simultaneously cutting low-carbon energy investment by $5 billion. Diandra Soobiah, Head of Responsible Investment at UK workplace pension provider Nest, stated in a declaration on Tuesday: "BP has underperformed over the past decade, including during periods when it prioritized oil and gas production. Now that the company has abandoned its renewable energy strategy, investors need assurance that any expansion of the upstream oil and gas portfolio will be subject to strict capital discipline and capable of generating sustainable returns."
The incoming new Chief Executive, Meg O'Neill, is expected to steer BP towards a more explicit return to fossil fuel businesses. This significant leadership change was announced last December, appointing Meg O'Neill, the head of Australia's Woodside Energy, as CEO, succeeding Murray Auchincloss who had held the position for only two years. O'Neill is not only the first externally appointed CEO in BP's over 100-year history but also becomes the first female leader of a global supermajor oil company.
In a statement, BP said Auchincloss will step down, and O'Neill will take up the role in April of this year, with Carol Howarth serving as interim CEO until then. This marks the second CEO change for BP in just over two years. Auchincloss succeeded Bernard Looney as CEO in January 2024, after the latter's abrupt resignation due to undisclosed past relationships with colleagues.
It is reported that O'Neill has been at the helm of Woodside since 2021 and previously spent 23 years at Exxon Mobil, giving her substantial industry experience. Under O'Neill's leadership, Woodside focused on developing its core natural gas assets, facilitated the acquisition of a proposed US liquefied natural gas plant in Louisiana, and secured approval to operate its oldest and largest Australian gas export facility until 2070.
O'Neill also helped complete the multi-billion dollar acquisition of BHP Group's petroleum division and expanded its LNG business beyond Australia. She has been a strong advocate for utilizing natural gas as a transition fuel to reduce global coal demand and lower emissions. Taking the helm at BP, O'Neill will bear the responsibility of enhancing the company's profitability and refocusing on its core oil and gas operations, signaling a significant strategic recalibration following its exploration of new energy areas.
Neil Beveridge, Managing Director at Bernstein Research, commented: "She [O'Neill] has a very hands-on track record in engineering and operations, which suggests BP will adopt a back-to-basics strategy. With O'Neill coming in, the direction is clearly going to be oil, gas, and LNG."
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