BP stops hiring and delays renewable energy deployment to win over investors

By Ron Bousso

LONDON (Reuters) – BP’s new chief executive Murray Auchincloss has imposed a hiring freeze and suspended new offshore wind projects as he puts a renewed emphasis on oil and gas amid investor discontent with his energy transition strategy, they said company sources.

The measures, which have not been previously disclosed, are part of a decision by Auchincloss to slow investment in big-budget, low-carbon projects, especially offshore wind, which are not expected to generate cash for years, multiple BP sources said. who did not want to be identified.

They mark a radical shift in the direction the CEO’s predecessor, Bernard Looney, took to quickly move away from fossil fuels. This weighed on BP shares as returns from renewables declined while oil and gas profits soared in the wake of the COVID-19 pandemic and Russia’s invasion of Ukraine.

BP has reassigned dozens of people tasked with identifying new renewable energy opportunities for projects already underway such as offshore wind power in Britain and Germany, three sources said.

Auchincloss and Chief Financial Officer Kate Thomson have prioritized investing in and even acquiring new oil and gas assets, particularly in the Gulf of Mexico and U.S. onshore shale basins, where BP already has large operations, company sources briefed on the matter said. the subject.

BP will also consider investing in biofuels and some low-carbon businesses that could generate near-term returns. Earlier this week, BP agreed to buy grains trader Bunge’s 50% stake in Brazilian sugar and ethanol joint venture BP Bunge Bioenergia for $1.4 billion.

It is also expected to make some job cuts in renewable energy, although no specific target was given, the sources said, adding that BP has imposed a company-wide hiring freeze with just a few exceptions, including line staff. front and security.

Auchincloss has promised a pragmatic approach since taking office in January, four months after Looney resigned for failing to disclose employee relationships.

In May, Auchincloss announced a $2 billion cost-cutting campaign by the end of 2026 from 2023. The 53-year-old also reduced his executive leadership team from 11 to 10 members.

BP said in a statement to Reuters that Auchincloss had introduced six priorities “to be a simpler, more focused and higher value company”.

Priorities include focusing the business and delivering “BP’s next wave of efficiency and growth projects”.

“The actions we are taking are part of that objective – and, of course, they are all in service of our objective of increasing the value of BP,” he said.

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BP’s highest-profile external hire under Looney was Anja-Isabel Dotzenrath, the former head of RWE Renewables who joined in 2022 to lead its renewables and gas division but left the role for personal reasons in April .

His successor, veteran BP executive William Lin, is expected to place a greater focus on gas operations when he takes over in the coming months, two sources said.

BP shares have underperformed rivals in recent months, raising speculation that it could be a takeover target.

This has increased pressure on Auchincloss, which is seeking to reassure investors who are balancing the need to decarbonise the global economy with increasing demand for fossil fuels in the short term.

BP spent $2.5 billion on renewables, hydrogen, electric vehicle charging and biofuels in 2023, out of a total investment of $16 billion.

BACK TO BLACK

BP is the only major oil company to have targets for reducing oil and gas production. Shell last year changed its strategy to focus on high-return businesses, reducing investments in many renewable and low-carbon energy businesses.

In February 2023, BP eased its key commitment to reduce oil and gas production between 2019 and 2030 from 40% to 25%. It maintained its renewable energy targets for 2030, including the development of 10 gigwatts of installed capacity.

Auchincloss last month further softened the language on the 2030 target.

In another sign of change, BP has hired several new employees to its exploration team, led by Bryan Ritchie since May, in a bid to replenish its reserves to sustain and even increase production.

BP is also committing more capital and labor to developing new fields, such as the Kaskida, Tiber and Gila discoveries in the Gulf of Mexico.

In recent weeks, it has also revamped its mergers and acquisitions division, combining it with the business development division led by Sam Skerry, three sources said.

Last October, BP said it had 18 billion barrels of oil and gas equivalent resources representing 20 years of its current production that could be developed to sustain its 2022 production level within its target returns.

(Reporting by Ron Bousso; Editing by Alexander Smith)