BP abandons renewables targets and returns focus to fossil fuels
BP's CEO will abandon a goal to double renewable energy generation by 2030 and return the focus to fossil energies as part of a new strategy announced on Wednesday in response to investor concerns about earnings.
BP shares have been underperforming their rivals over the past few years, and it has already abandoned its goal to reduce oil and gas production by 2030.
Two sources familiar with the situation said that on Wednesday, at BP's capital markets day, Murray Auchincloss would tell investors that the company has abandoned its goal to increase renewable generation capacity by 20 times between 2019 and 2030, to 50 gigawatts. Two sources close to the matter said that this plan was not previously announced.
BP has declined to comment.
In its earnings reports, BP reported that it had 8.2 GW in renewable generation capacity. For 2019, BP’s net wind capacity was 926 megawatts. The company did not provide a number for the total renewable capacity in that year.
Sources said BP would also abandon a target of core earnings (EBITDA), which was $49 billion for this year, and set a percentage annual growth target instead. The sources declined to give their names because they weren't authorized to speak publicly about the new strategy.
BP said it would be willing to drop its targets in a conference call with analysts, but it has not yet made a formal announcement. BP did not reach its EBITDA goal of 40.9 billion for 2024.
Sources said that the company would also announce plans to sell assets and reduce other investments low in carbon to reduce debts and increase returns.
The capital markets event was originally planned for New York on February 11, but it was moved to London to coincide with Auchincloss's medical procedure.
SECTOR WIDE SHIFT
Major companies in the energy sector have shifted their focus back to oil and natural gas after reducing carbon emissions to curb climate change. Returns have been easier to achieve as fossil fuels prices have recovered from the pandemic lows.
The investor climate has also changed since the reelection of Donald Trump as U.S. president, a climate sceptic who advocates fossil fuels.
After activist investor Elliott Investment Management acquired a stake of nearly 5%, pressure has increased on BP.
Elliott, who is known for bringing about changes in companies like Honeywell and Southwest Airlines by imposing stricter cost discipline, wants a complete overhaul at BP.
Elliott, according to a separate source with knowledge of the issue, wanted BP's green energy expenditures reduced and assets like wind and solar sold.
Source who asked to remain anonymous said that BP could also gain from selling Castrol lubricants, as well as its service station network, to unlock value and increase share buybacks.
Under Bernard Looney's predecessor, Auchincloss, BP committed to reducing oil and gas production by 40% by 2020, while rapidly increasing renewables by 2030.
BP has lowered its reduction target for 2023 to 25%.
Auchincloss, since taking office in 2010, has announced plans to reduce costs and staff by 5%.
Bank of America analysts said that BP may announce on Wednesday a reduction of $2-3 billion in its annual capex for low-carbon technologies. BP's capital expenditures for 2024 were $16.24 billion.
(source: Reuters)
