The latest trauma at BP needs perspective. The disappointing financial results just unveiled and the presence of activist Elliott on the share register are unsettling for investors.
But they are as nothing compared to the aftermath of the Deepwater Horizon explosion in 2010, which came close to putting the company into Chapter 11 bankruptcy.
Nor does it come anywhere near to the disruption to revenues from the freeze on Russian assets after Vladimir Putin’s war on Ukraine three years ago.
Chief executive Murray Auchincloss inherited a difficult hand from his predecessor. Bernard Looney sought to respond to climate change by taking BP on a green journey, seeking a smooth transition from fossil fuels.
Most of the rest of big oil moved in the opposite direction. The cut-off of Russian energy supplies directly to the West and demand for security of power supplies has provided a new lease of life for oil and gas.
That doesn’t mean BP faces an existential crisis. In the latest financial year overall profits came in at £7.2billion, leading the green lobby to complain that it is still spending seven times more on oil than on the ‘low carbon’ agenda.
They had better prepare themselves for the worst. Far from doubling down on green investment, Auchincloss is planning a ‘reset’ at a postponed capital markets day for big battalion investors on February 26.
Matters have not been made any easier by his bout of ill-health and an underwhelming final quarter. This opened the door to all kinds of speculation about the company’s future.
Don’t expect Auchincloss to go all out for low carbon. Instead, he will aim to simplify the business with substantial disposals, rewarding shareholders with buybacks and dividends.
Set for the chop is (Burmah) Castrol, once the home of Denis Thatcher (Margaret Thatcher’s spouse), bought by BP for £4billion at the turn of the century.
Also for sale are thought to be BP’s chain of shiny new electric vehicle charging stations. It already has offloaded capital spend on windfarms after putting them into a joint venture with Japanese power group Jera.
Focus will return to what BP always has been best at, which is exploration and production.
There is the possibility that with a relatively modest market value, currently at £73.4billion, it could become a takeover target. A merger with London-listed Shell long has been speculated. Rival offers from US-based Chevron Hess or Conoco are not out of the question.
Oil companies may not be flavour of the era, especially within Ed Miliband’s Department of Energy. However, it is hard to think that an overseas buyer for BP, with its long British heritage and Whitehall connections, would be welcomed with open arms. It would weaken the UK’s already fragile and intermittent energy security.
Any attempt to move the share listing to New York also would be unwelcome when there is an all-out effort to strengthen London as a centre for equity trading.
On the books
BP is not the only oil group in Elliott’s sights. It has disclosed a 3.44 per cent stake in oil refiner Phillips 66, valued at £2billion. It is urging the Houston-based group to sell or spin-off its ‘midstream’ operation which runs oil and gas pipelines.
Paul Singer’s funds are on a roll having engineered shake-ups, including some chief executive departures, at Starbucks, Southwest Airlines, the internet and technology company Match Group and industrial giant Honeywell.
Amid all this, Elliott-owned booksellers Waterstones in the UK and Barnes & Noble in the US, both run by James Gaunt, are islands of stability.
They might provide a good home for some of those superfluous WH Smith High Street shops.
Stunted growth
The last best hope for the sluggish economy at present is lower interest rates.
Hawkish Bank of England rate-setter Catherine Mann’s switch to voting for a half-a-percentage cut in bank rate last week, to 4.25 per cent, reflects her belief that consumer demand is on the ropes amid the worsening jobs market.
City scribblers at Capital Economics have joined the gloomsters lowering the UK growth forecast for this year to 0.5 per cent from 1.3p. That’s below the 0.75 per cent Bank of England downgrade.
Unhappy days!
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