(Oil Price) – BP is increasing its investment in upstream oil and gas to $10 billion per year while slashing spending on clean energy by more than $5 billion a year in the highly anticipated strategy reset announced on Wednesday.
BP’s stock has been underperforming its UK-based peer, Shell, and other major international oil firms in recent years. The BP board has been under increased pressure to seek fundamental changes to the business to reward shareholders more.
The pressure on BP became more intense earlier this month after activist investor Elliott Management bought a stake in the supermajor and demanded changes in strategy or even board reshuffles.
BP aims to grow shareholder value in the strategy reset announced today. The pivot back to oil and gas includes increased investment in the upstream business, higher oil and gas production, and significantly reduced spending on low-carbon energy solutions.
The reset will see BP reallocating capital expenditure to higher-growth businesses. This means increasing oil and gas investment to about $10 billion per year and slashing transition investment to around $1.5 billion–$2 billion a year, which is over $5 billion per year lower than the previous guidance.
In the upstream, BP will aim for 10 new major projects to start up by the end of 2027, and a further 8–10 projects by the end of 2030. Production is also expected to grow, to 2.3–2.5 million barrels of oil equivalent per day (boed) in 2030, with capacity to increase to 2035.
That’s a stark departure from the previous strategy to lower oil and gas output by 2030.
In transition investments, BP will selectively focus investments in biogas, biofuels, and EV charging, and will be high-grading projects and focusing on fewer key markets.
The firm will be “capital-light in low carbon energy,” with limited further projects in hydrogen and carbon capture, it said.
BP will also look to reduce costs and net debt, boosting the target to $4 billion–$5 billion of structural cost reductions by the end of 2027 and targeting $20 billion of new divestments to be announced by the end of 2027.
“We will grow upstream investment and production to allow us to produce high margin energy for years to come,” chief executive Murray Auchincloss said.
“And we will be very selective in our investment in the transition, including through innovative capital-light platforms. This is a reset bp, with an unwavering focus on growing long-term shareholder value.”
By Tsvetana Paraskova for Oilprice.com
