Activist investor Elliott Management has declared a stake of over 5% in BP and has urged the company to boost cash flow via spending cuts.
“Eight weeks ago, we announced a fundamentally reset strategy, and our focus now is on delivering that at pace,” spokesman David Nicholas told Bloomberg in a statement. “We welcome constructive feedback from all shareholders as we focus on delivering.”
The activist investor’s free cash flow target for the supermajor is $20 billion annually by 2027, which is 40% above BP’s own target, according to the Financial Times. Last year, BP declared free cash flow of just $8 billion, Reuters noted in a report on the latest news. The supermajor planned to boost this by some 20% annually through 2027, ending up with a total of just below $14 billion by that year, according to Reuters calculations.
Elliott’s spending proposal is for a reduction from $13-$15 billion annually over the next three years to some $12 billion annually. Reuters quoted an unnamed source as saying Elliott had discussed its intentions with more than 20 BP shareholders. The activist investor itself has n voting rights at the supermajor because it built its stake via equity swaps, allowing the owner to benefit from stock prices rises without being a literal owner in the company.
Even so, Elliott has been able to apply intense pressure on BP, driving a reversal of transition plans at the company. In a major reset back to oil and gas, BP last month said it would increase 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 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 in 2030, with capacity to increase to 2035.
By Irina Slav for Oilprice.com
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