Elliott presses BP to boost free cash flow by 40% via spending reductions, FT reports

The Financial Times reported that Elliott Management, an activist investor, has urged BP a 40% increase in its free cash flow through spending cuts.

Elliott wants BP to focus on achieving a $20 billion annual free cash flow target by 2027 instead of growing its oil business, according to a report citing sources familiar with the issue.

BP has worked to increase its share price, which has lagged behind rivals Shell and Exxon in recent years.

According to the report, the hedge fund suggests that BP sell its solar and offshore-wind power businesses. It asserts that it can reduce its spending on oil and gas operations because of the sufficient future oil reserves.

A regulatory notice of holdings revealed on Tuesday that Elliott owns a little more than 5% of BP's voting rights. According to LSEG, this makes Elliott the second largest shareholder in BP, after BlackRock.

The report said that the hedge fund believes BP could achieve a higher value by reducing its capital expenditures to $12 billion a yearly from the target range of $13 to $15 billion.

Elliott's remarks differ from those of Legal and General, BP's 7th-largest shareholder, who earlier this month voiced "deep concern" about the company's move to focus on oil and gas instead of renewable energy. Legal and General holds a 1.05% share in BP.

Elliott engaged with several major BP investors to build consensus on further changes at oil major. This could include cost reductions and leadership changes.

BP said in a mailed announcement that it welcomed constructive feedback from shareholders. Elliott, however, declined to comment.

(source: Reuters)