BP is under pressure from a hedge fund to ditch a strategy that will see it cut its oil and gas output in favour of investing in clean energy.
London-based Bluebell Capital Partners has written to BP arguing that the FTSE 100 energy company’s strategy has depressed its share price and presumed a “drastic decline in oil and gas demand, which we consider to be utterly unrealistic”.
BP was already undergoing significant changes under former chief executive Bernard Looney, who had set a course to cut oil output by a quarter compared with 2019 levels by the end of the decade – making it the only oil major to pledge to cut output, albeit having reduced its ambitions.
The company has also invested in green energy such as solar, wind and biofuels, and it is looking at green hydrogen production as it considers ways to make money once oil demand falls.
Looney was ousted as chief executive in September after admitting he failed to fully inform the BP board about relationships with colleagues. He was later formally dismissed and denied more than £32m in pay and share awards over “serious misconduct”.
However, BP is still run by supporters of Looney’s strategy. Chairman Helge Lund appointed Looney’s former finance boss, Murray Auchincloss, as chief executive.
Bluebell co-founders Giuseppe Bivona and Marco Taricco wrote in their letter that they would have called for Looney’s resignation had he not left. The letter was sent in October, shortly after it acquired a small stake in BP.
Bluebell is a relatively small but influential fund which has previously mounted campaigns against French food company Danone, where it played a part in the departure of its chief executive, as well as in Glencore, where it failed in its efforts to have the UK-listed commodities company sell its thermal coal operations. However, it only manages about $150m across a dozen or so companies, meaning it does not have the financial might to force BP into a shareholder vote.
Bivona told the Guardian that the company was made up of “passionate environmentalists”, and that the fund manager was “not telling BP to stay away from clean energy”.
However, he said he wanted BP to “stay away from businesses in which they have no right to win” and where investment returns are low, such as solar and offshore wind.
In the 30-page letter, which was first reported by the Financial Times, Bluebell argued that BP was worth 50% more than its share price implied, and called for it to increase production in the next few years and pledge only to cut emissions “in line with society”. BP’s shares traded at 466p on Monday, valuing the company at £79bn.
Bluebell’s calls for a change in strategy will face opposition from BP’s leadership and also from environmentalists, many of whom argue that the company is still not doing enough to cut emissions. The International Energy Agency in 2021 said that no new oil and gas fields should be drilled if the world is to limit temperature increases.
Mark van Baal, head of Dutch activist group Follow This, has in recent years forced shareholder votes at BP, Shell, Chevron and ExxonMobil calling for stronger emissions reduction targets.
ExxonMobil is taking legal action to try to dismiss a resolution for its next annual meeting.
Van Baal questioned whether Bluebell would gain much shareholder support, and argued that BP’s share price under performance versus peers was related to its decision to cut its dividend in 2020.
“We don’t think responsible shareholders will allow a conservative investor to slow down a transition that is already moving far too slowly,” he said.
“Letters don’t change companies; shareholders’ votes do. Let them file a shareholder resolution and see how many shareholders support going back in time. We don’t think they will get much votes.”
A BP spokesperson said the company “welcomes constructive engagement with our shareholders” and that it has received support for its strategy after recent meetings with most major shareholders.
The spokesperson said: “We continue to make significant progress, remain focused on delivery, and are confident the strategy will grow the value of BP and deliver sustainable long-term value for shareholders.”
