In an about turn, UK energy major, bp severely reduced its planned investment in renewable energy and said it would increase annual oil and gas spending to $10 bill.
This was a major strategy shift thought to be aimed at boosting earnings and investor confidence.
bp, which has underperformed other majors, such as Shell and ExxonMobil, had come under increasing pressure to change strategy after news that US activist investor, Elliott Investment Management, had built a 5% stake in the company.
The company cut planned annual investment in renewable energy businesses by more than $5 bill, from its previous forecast, to between $1.5 bill and $2 bill per year and said it will grow oil and gas production to between 2.3 mill and 2.5 mill barrels of oil equivalent per day in 2030. It pumped 2.36 mill boepd last year in comparison.
"It's a radical shift," CEO Murray Auchincloss told Reuters in a phone interview after the announcements during the company's investor day yesterday.
Under Auchincloss' predecessor, Bernard Looney, in 2020, bp pledged to cut oil and gas output by 40%, while rapidly growing its renewables’ businesses by 2030. It lowered that target to 25% in 2023.
bp also revised its approach to so-called Scope 3 emissions by removing its previous target of a 20% to 30% absolute reduction between 2019 and 2030.
Auchincloss said the transition to renewable energy had been slower than the company initially expected following the war in Ukraine, the pandemic, volatile energy markets and changing attitudes towards renewable energy in some countries.
"What that meant is hydrocarbon demand continues to be very, very strong, stronger than we would have envisioned five years ago, and the transition has not proceeded at the pace we would have thought.
"We will be very selective in our investment in the transition, including through innovative capital-light platforms. This is a reset bp, with an unwavering focus on growing long-term shareholder value.
"Three big things we've done: reducing capex, reducing costs, material divestment with an outcome of growing cashflow and returns," Auchincloss said.
bp aims to spend between $13 bill and $15 bill annually through 2027, trimming $1 bill to $3 bill from 2024 levels, with this year’s capital expenditure expected to be around $15 bill.
