Why next year might be even more difficult in light of BP's "long, painful decline"

BP's long-suffering shareholders have been demanding reform

It will not arrive soon enough, according to Kaylie Pferten.

In terms of corporate announcements, BP's most recent update was incredibly ambiguous. Long-suffering shareholders of one of the largest international corporations in the UK may feel that the choice of the company's chair is very important, but the oil major does not appear to care. A statement released on April 4th stated that Helge Lund would be leaving, but that the precise date of his departure would be "in due course" and "most likely during 2026."

Nonetheless, the news that Lund is leaving will be welcomed by activist investors, particularly those led by the aggressive Elliott Management, which has amassed a nearly 5% stake in BP. They and others have been advocating for significant changes at the organization. You can't wait for these. BP is now worth only half as much its great rival Shell, although the two businesses used to be neck and neck. The shares of BP have increased by just 9% over the last five years, whereas those of Shell and ExxonMobil have increased by 64% and 168%, respectively. Everyone has been able to see that something has gone horribly wrong.

Green energy was BP's poor prediction.

It's true that some changes have already begun to occur. In February of 2023, Murray Auchincloss, the company's CEO since then, announced a renewed emphasis on oil and gas. The company has already begun to move away from the focus on green energy that has dominated much of the past 20 years.

Even so, despite the fact that there is a lot of talk, not much is actually happening at this time. BP needs to act more quickly. It is hard to think that the departing chairman is not contributing to the issue. After all, Lund had supported BP's prior approach under Bernard Looney, the company's former CEO. This included a shift away from gas and oil and a goal to reduce its output of hydrocarbons by 40% during this decade. BP erred by placing such a large wager on green energy when it ought to have been increasing its oil reserves and placing bets on fracking to extract new resources.

The US and international shale industry has been flourishing while BP has been concentrating on renewable energy. ExxonMobil's acquisition of Pioneer Natural Resources and Chevron's acquisition of Hess were the two largest acquisitions in the US shale industry last year alone, totaling £105 billion. Numerous large oil companies have become major players in the shale industry, and enormous sums of money have been made. BP had the opportunity to spearhead that.

It could have been using its influence in the UK to argue that we should be developing our own shale resources rather than relying on gas shipped in from abroad, even if it skipped out on the early boom. It could have also been opening up new fracking fields, now that the industry is growing in countries like Argentina. Instead, BP ignored it and left the field open for others. In contrast to its main US competitors, it has not participated in the bidding for the shale companies and has not made any significant new oil or gas discoveries. Over the past few years, the energy sector has seen a large number of expansion prospects. However, it looks like BP missed nearly all of them.

More delay and hesitancy.

Those errors are not insignificant. They are a sign of a culture that has been making poor choices for a long time. It will probably be even more difficult next year.

The oil price has fallen to just £60 per barrel, less than half of the £120 it reached in 2022, following the global financial crisis brought on by Donald Trump's tariff wars. Throughout the summer, it might drop below £50. The big oil firms will be severely impacted by that, and BP wasn't exactly in the best of shape to begin with.

A protracted search for a replacement is the last thing that BP needs. On April 4, Lund ought to have announced his resignation and named a replacement right away. A team that could begin reviving the company would have been in place along with a new CEO. Rather, BP's agonizing decline will only be prolonged by additional delays and another year of indecision.