Elliott Management, the activist U.S. hedge fund with 5% in BP, is doubling down on its pressure on the UK supermajor to deliver massive cost reductions after the reset, seeking doubling of the current target of $5 billion by 2027, the Financial Times reports.
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 year after Elliott bought a stake and demanded changes in strategy. Elliott has been pushing for changes in strategy and board reshuffles to address BP’s underwhelming stock performance.
In a major reset back to oil and gas, BP in February 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.
BP will also look to reduce costs and net debt, aiming at $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.
Elliott is not happy with the structural cost reductions target and wants it doubled, to $10 billion in cost cuts by 2027 compared to a 2023 baseline, according to sources who spoke to FT.
BP has pledged that its second-quarter results – due out on August 5 – would include a progress report on the cost reductions.
Elliott’s ask for doubling the cost cuts target may hamper BP’s long-term growth, another major investor in the UK energy giant told FT, noting that “I would guess there is some upside to BP’s stated target but doubling it to $10bn seems overly aggressive.”
For the second quarter, BP has warned that lower oil and gas prices are expected to dent the earnings, despite higher output and stronger refining margins.
By Tsvetana Paraskova for Oilprice.com
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