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Profits or Planet? BP’s ‘New Beginning’: The Shift from Low Carbon to Core Oil and Gas and Q4 2024 Results
02/14/2025
New CEO, New Beginning: Is Auchincloss Bold Enough to Take BP to the Top?
BP has unveiled plans for what its Chief Executive, Murray Auchincloss, calls a “fundamental reset” of the company’s strategy. This comes amid reports that activist hedge fund Elliott Management has taken a stake in the British oil major, potentially pressuring the board and executives for higher shareholder returns. While Elliott’s involvement remains unconfirmed, the implications are already rippling through the industry.
After months of speculation, Auchincloss broke his relative silence and outlined a major strategic shift that pivots BP away from its previous emphasis on low carbon. He prioritizes core oil and gas projects to unlock stronger cash flow and satisfy shareholders.
“It will be a new direction for BP,”
—Murray Auchincloss, Chief Executive Officer
On February 26, at BP’s Capital Markets Day, Auchincloss promises more detailed plans for reshaping BP’s portfolio, including how it will reduce costs, redeploy capital, and restore its competitive edge.
Activist Pressure and Shareholder Sentiment
BP has struggled with valuation in recent years compared to European and American oil peers, partly due to significant investments in low-carbon ventures. These ventures, while forward-thinking, did not deliver the anticipated returns quickly enough, leaving BP burdened with high costs and lower market capitalization.
Elliott Management’s rumored stake in the company has fueled speculation. Known for its aggressive tactics—such as demanding leadership changes, corporate break-ups, and spinoffs—Elliott could push BP to reorganize its business drastically. Analysts even suggest the hedge fund might advocate for:
- Major asset disposals or spinoffs
- Board changes, including potential removal of Chairman Helge Lund
- A shift in BP’s primary market listing to the U.S. (though this is politically and logistically complex)
Elliott has neither confirmed nor denied these possibilities. Still, market watchers see the move as part of a larger trend: investors pushing traditional energy companies to maximize immediate shareholder returns rather than spending heavily on lower-carbon initiatives that may take years to pay off.
From Looney to Auchincloss: Continuity or Clean Break?
When Bernard Looney stepped into BP’s top job in 2020, he pursued an ambitious transition to cleaner energy. By targeting a 40% cut in oil-and-gas output by 2030 relative to 2019 levels, he repositioned BP as a leader in renewables, wind, solar, and electric vehicle (EV) charging. However, Looney’s tenure ended abruptly in September 2023 over undisclosed personal matters.
Auchincloss, Looney’s CFO, was initially seen as a continuity candidate. Over the past year, though, he has:
- Rolled back the 40% output reduction target
- Increased investment in hydrocarbon projects in places like the Gulf of America (Mexico) and Iraq
- Maintained certain low-carbon activities but with reduced capital allocation
Now, by referring to a “fundamental reset,” Auchincloss signals that he’s ready to move beyond incremental changes and instead carve out a new path, reclaiming BP’s position as a top-tier oil-and-gas powerhouse with leaner, more focused operations.
Financial Performance: 4Q and Full-Year 2024 Results
BP’s latest financial disclosures offer a revealing snapshot of its current challenges—and opportunities:
- Underlying Replacement Cost Profit
- 4Q 2024: $1.17 billion
- Analyst Consensus: $1.26 billion
- 3Q 2024: $2.27 billion
- Weaker-than-expected refining margins and lower seasonal volumes contributed to the drop. This measure, akin to net income for U.S. oil majors, shows BP is still profitable but under pressure.
- Cash Flow from Operations
- 4Q 2024: $7.43 billion
- 3Q 2024: $6.76 billion
- Despite stronger operational cash flow quarter-on-quarter, the company reported a net loss of $2 billion (vs. a $200 million profit in 3Q) after booking $1.5 billion in impairments.
- Share Buybacks and Dividend
BP announced a $1.75 billion quarterly share buyback plan and raised its dividend by 10% in 2024. However, it also teased a potential shift in 2025 targets. Capital discipline and balance-sheet strength remain key priorities, especially as the company commits to share buybacks further.
- Comparison with European Peers
Rivals such as Shell and TotalEnergies have sustained or expanded their buyback programs, buoyed by stable cash-flow generation even amid fluctuating oil prices. BP’s lower quarterly profit has raised questions about whether the company can keep pace with competitors while revamping its core strategy.
Laying the Foundation: 2024 Operational
In a detailed report on its full-year 2024 performance, BP emphasizes how it has spent the last 12 months “laying the foundations for growth”:
- Portfolio Reshaping
Sanctioned 10 major projects and paused or exited 20.
Focused capital on high-return hydrocarbon ventures such as Kaskida in the Gulf of America (aiming for 80,000 barrels of oil per day by 2029) and Tangguh UCC in Indonesia (the country’s first at-scale enhanced gas recovery with CCUS).
- Strategic Partnerships
Formed a new joint venture, Arcius Energy, with ADNOC’s investment company XRG to develop natural gas resources in Egypt.
Signed an MOU with the Iraqi government, exploring redevelopment in the Kirkuk oilfields, estimated at around 9 billion barrels of recoverable oil.
- Low-Carbon Projects
Bioenergy: Gained full ownership of its Brazilian sugar and ethanol joint venture, now branded BP Bioenergy.
EV Charging: Expanded EV networks under the Aral pulse brand in Germany and opened its first large-scale EV hub in the U.S. at a TravelCenters of America site.
Offshore Wind: Formed a strategic platform with Japan’s JERA (JERA Nex bp) to combine assets totaling up to 13 GW of potential net generating capacity.
Renewable Natural Gas (RNG): Archaea Energy started up nine new RNG plants in the U.S., leveraging waste emissions as a clean, profitable feedstock.
- Efficiency Gains and Cost Reductions
Achieved $0.8 billion in structural cost reductions in 2024, part of a broader target of at least $2 billion in annual savings by 2026.
These cost-containment measures have partially offset higher energy costs and inflation, positioning BP to generate consistent operating cash flow—even under volatile market conditions.
Looking Ahead: What to Expect at BP’s Capital Markets Day
Auchincloss has promised a “new beginning” for BP at the upcoming Capital Markets Day on February 26, 2025. Investors and industry analysts eagerly await details on:
- Revised Production Targets: Will BP align its production targets more closely with U.S. peers known for high-output, short-cycle projects?
- Renewed Shareholder Returns: How far will BP go to appease investors—particularly an activist fund like Elliott—that demand consistent buybacks and dividends?
- Potential Organizational Overhaul: Could we see spinoffs, strategic divestments, or even a leadership reshuffle?
- Balancing ‘Green’ vs. ‘Black’: BP has stated it will continue lower-carbon investments, but at a reduced scale. The proportion of overall capital spending dedicated to wind, solar, hydrogen, and EV charging remains a topic of debate.
Auchincloss is confident that shareholders support the changes: “It’s an evolving thing over the past 12 months, and I feel decent support,” he said. Market watchers will be scrutinizing every move, especially as activist pressure intensifies.
A Turning Point for BP
In 2024, BP restructured, cut costs, and sanctioned critical projects to secure future growth. Yet, the company also faces intense scrutiny—external from hedge funds like Elliott, and internal from stakeholders concerned about the scale-back of green ambitions. How BP navigates these challenges could redefine its profitability and the broader conversation around legacy oil giants transitioning to a lower-carbon future.
Will BP’s new strategy deliver a renaissance for one of the world’s largest energy companies, or will it be a reprieve before inevitable competition and climate realities catch up? The next few months promise to be pivotal.
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