Time for BP’s chair to head for the exit | Nils Pratley

Here – maybe only for another two weeks – is how BP describes the progress of its current strategy: “Since we set out our strategy in 2020, our track record of delivery has given us increased confidence as we invest in BP’s transition and the energy transition,” boasts the website.

That message will soon be deemed non-operative, one suspects. The shoddy share price says the stock market doesn’t have “increased confidence” in BP’s current approach, and it sounds as if the board doesn’t either. The strategy will be “fundamentally reset” on 26 February, chief executive Murray Auchincloss said on Tuesday, and there will be “a new direction for BP.”

Cue long City checklists of ideas for that new direction. Less investment in renewables and more in oil and gas? Almost certainly. Other members of the Big Oil club have edged away from past promises to be slightly greener, and some never made them in the first place.

Or how about going a step further and breaking up the company, separating the fossil fuel operations (exploration, production, refining and trading) from the low-carbon and renewables ones (wind, solar and biofuels)? That would definitely qualify as a fundamental reset but feels highly unlikely to happen. Companies such as BP don’t split themselves up voluntarily. And, since the same management was buying full control of a big Brazilian biofuels joint venture as recently as last summer, it would be odd to deem that operation non-core now.

Thus the guess here is that Auchincloss will unveil a souped-up version of what he has been doing anyway for the past year. That is to say, finding more ways to make renewables “capital light”, as with the move to shove most of the offshore wind assets into a joint venture with Japanese company Jera, and boosting the budget for oil and gas. The latter would probably involve hurrying up disposals because the current high borrowing levels don’t leave much room for financial manoeuvre. Certainly, the vow to reduce fossil fuel production by 25% by 2030 looks to be toast, to the dismay of campaigners.

The suspense will be over in a fortnight and, in the meantime, the vacuum may be filled by a missive from Elliott, the activist New York hedge fund with an undisclosed stake. Elliott doesn’t always hit the mark – its manifesto at GlaxoSmithKline in 2021 was pure waffle and its attempt to force energy firm SSE to split itself into two never gained traction – but it would be pushing at an open door at BP. Even shareholders who supported the original 2020 vision to reduce oil and gas production by 40% can see that BP, at the current share price, is a sitting duck for a takeover if nothing changes.

But, whatever version of a reset BP emerges, the new direction will be more credible under a new chair. Helge Lund, in the seat since the first day of 2019, is too closely tied to share price failure and BP’s inability to carry its investors with it.

Nobody would pretend his job was easy. At one end of the spectrum, some investors wanted BP to run harder with renewables; at the other, sceptics never truly signed up. Meanwhile, BP has been blown around by events. The pandemic, when oil prices plunged, and Russia’s invasion of Ukraine, which sent prices soaring again, upset the underlying financial calculations. The missing ingredient, however, was any sense of clarity from the boardroom about what BP wants to be. Authority was absent.

Auchincloss, one could argue, is as closely associated with the muddle because he was the finance director before he became chief executive. But he’s clearly there to stay. Thus, if BP really wants to signal a fresh start, the chair is the place to look.

There’s no obvious successor in the boardroom, so a switch probably can’t happen immediately. The bottom line, though, is that the independence of once-towering BP is being seriously debated in the City. When things have become that bad, it’s time to let somebody else have a go in the interests of “increased confidence”.