Open Editor's Digest for free
Roula Khalaf, Editor of the FT, selects her favorite stories for this weekly newsletter.
Donald Trump's US presidential inauguration speech this week included praise for fossil fuels and “liquid gold under our feet”. Despite BP's large oil and gas operations and reserves in Texas and the Gulf of Mexico (or America), you have to dig deep to find gold in its money.
A UK company now methods another major multinational energy investor by market value: not only a sixth of ExxonMobil's value but less than half of its arch-rival Anglo-Dutch. It announced last week it was cutting 4,700 jobs in a renewed bid to become a “simpler, more focused, more value-added company”.
But BP has made several announcements about its future over the years and has a record of disappointment. It has also continued with a few key managers, the most recent being Murray Auchincloss, who recently did. postpone A plan update is expected for investors next month to be returned to the medical system.
Auchincloss succeeded Bernard Looney, who was present you are fired in 2023 amid allegations of misconduct in his previous relationships with his co-stars. “It's almost Shakespearean. This company has stars,” points out another BP veteran. He certainly suffered a series of unfortunate events while trying to convince investors and respond to climate change.
The worst was the Deepwater Horizon oil spill in 2010, which killed 11 workers, polluted the Gulf of Mexico and forced it to sell assets to meet a 65bn bill. The company took a long time to recover and arguably never has: it still has a total debt of 24 billion dollars and counting. approved the sixth stage in the Gulf last year, in a field that first received it in 2006.
Then came Looney's promise five years ago that BP would cut oil and gas emissions by 40 percent by 2030, and “reimagine energy for people and our planet”. This was more talk than substance and BP has distanced itself from it ever since, as high interest has been paid to its vision of being able to build wind farms cheaply.
The kicker was Vladimir Putin's full invasion of Ukraine in 2022, which forced BP to sell its small stake in the Russian oil company Rosneft for a price of 25bn. After making a lot of money in the middle of the 2000s from TNK-BP, the first collaboration with a group of oligarchs, was finally fired. Like others, Russia was surprised.
But companies make their fortunes, and BP can hardly claim to be unlucky. The thread that runs through its recent history is its great sense of ambition and purpose, which has outstripped its ability to implement strategies. While ExxonMobil sticks to dealing with the world as it is, BP tends toward wishful thinking.
This goes back to Chief John Browne, who transformed the company as CEO by acquiring Amoco and Arco in the US and striking the TNK-BP deal. He also brought intelligence to the strategy, including little evidence that BP was going “beyond petroleum”. The slogan didn't last but its legacy is that every BP leader craves vision.
IBP is not a commodity. Its operations are generally well regulated, even though Deepwater Horizon is over, and it takes strict compliance. But it is more intelligent than instinct (“There are a lot of intelligent people there,” says the observer, not entirely as praise). One calls it “more like a government than a business”, without the negative impact of making a profit on its competitors.
Its commitment to decarbonise was partly prompted by social and government pressure following the 2016 Paris agreement to reduce global warming. It also hopes to attract investment from ESG funds and benefit from the financial revolution. But that failed and didn't react as quickly as Shell's entry to change direction. It has been dragged down by bad financial results, changes in management and poor decision-making.
BP now faces a world where Trump tells the oil companies to “calm down, hold the baby” and pull the US out of the Paris accord. Greenpeace is currently being blamed for not cleaning up carbon fast enough. If the last few years have proven anything, it's that it's impossible to please both sides, especially as an energy company with its headquarters outside the US.
Three months before Deepwater Horizon, the market value of BP it passed briefly that of Shell but now it is lagging far behind. There will be many bankers wondering if they can handle a merger or acquisition. If BP is 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.