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Donald Trump’s inaugural address as US president this week included a eulogy of fossil fuels and “liquid gold beneath our feet.” Despite BP’s significant oil and gas operations and reserves in Texas and the Gulf of Mexico (or America), you have to drill deep to find gold in its finances.
British society now trails the market value of other large investor-owned energy multinationals: it represents not only a sixth of the value of ExxonMobil but less than half that of its former Anglo-Dutch rival Shell. He announcement last week it cut 4,700 jobs in a renewed effort to become “a simpler, more focused, higher-value company.”
But BP has made many pronouncements about its future over the years and has a record of disappointments. She has also passed through a few CEOs, the latest being Murray Auchincloss, who has just had to postpone a highly anticipated investor strategy update next month for recovering from a medical procedure.
Auchincloss succeeds Bernard Looney, who was licensed in 2023 amid allegations of misconduct regarding his past relationships with colleagues. “It’s almost Shakespearean. This company is cursed,” reflects a BP veteran. It has certainly suffered a series of unfortunate events while trying to please investors and respond to climate change.
The worst setback was the Deepwater Horizon oil spill in 2010, which killed 11 workers, polluted the Gulf of Mexico and forced the company to sell assets to meet a $65 billion bill. The company took a long time to recover and arguably never did: it still has net debt of $24 billion and only approved a sixth platform in the Gulf last year, in a field first discovered in 2006.
Then came Looney’s promise five years ago that BP would cut its oil and gas production by 40% by 2030 and “reinvent energy for people and our planet.” This approach was bolder in rhetoric than in substance and BP has recently moved away from it, high interest rates undermining its vision of being able to build wind farms at lower cost.
The coup was Vladimir Putin’s full-scale invasion of Ukraine in 2022, which forced BP to abandon its minority stake in Russian oil company Rosneft at a cost of $25 billion. After making a lot of money in the mid-2000s from TNK-BP, her initial joint venture with a group of oligarchs, she was eventually forced out. Like others, Russia took him by surprise.
But companies make their own fortunes, and BP can’t just pretend to be unlucky. The common thread throughout his recent history is his great sense of ambition and mission, which has outpaced his ability to put his plans into practice. While ExxonMobil sticks to managing the world as it is, BP is prone to wishful thinking.
It dates back to Lord John Browne, who transformed the company as CEO by acquiring Amoco and Arco in the US and completing the TNK-BP deal. He also brought intellectual flare to the strategy, including the idea, barely demonstrated, that BP would go “beyond oil.” The slogan didn’t last, but its legacy is that every BP leader aspires to a vision.
BP is not a cowboy outfit. Its operations are generally well-run, despite the Deepwater Horizon failure, and it takes compliance seriously. But he has more intellect than instinct (“There are a lot of smart people there,” says one observer, without taking that as praise). Another calls it “more like a state than a business,” lacking the fierce desire for profit of its rivals.
Its commitment to decarbonize was partly driven by social and government pressure following the 2016 Paris agreement to limit global warming. It also hoped to attract investments from ESG funds and benefit from a financial transition. But it failed and the company did not respond as quickly as Shell change direction. It was stalled by poor financial results, management upheaval and strategic indecision.
BP now faces a world in which Trump tells oil companies to “drill, baby, drill” and withdraws the United States from the Paris agreement. He is meanwhile accused of greenwashing by Greenpeace for not having decarbonized quickly enough. If the last few years prove anything, it’s that it’s impossible to please both sides, especially as an energy company headquartered outside the United States.
Three months before Deepwater Horizon, the stock market value of BP briefly exceeded that of Shell, but it is now far behind. Many bankers will wonder if they can arrange a merger or takeover. If BP wants to remain independent, it needs to show investors that it can make things happen, rather than looking to the future. There is such a thing as being too smart.