BP plans to abandon an ambitious goal to reduce its oil and natural gas production by the year 2020 as it fights to close a valuation difference with competitors in the energy sector.
Bernard Looney, the CEO of FTSE 100 Oil Company, set a 2020 goal for the company to increase spending on renewables and reduce oil and gas production by 40% by 2030. Last year, the former chief executive had to resign after failing to disclose his full personal relationships with co-workers.
After a dramatic recovery in commodity prices in February of last year, the target was reduced to a 25% reduction in production from 2019 levels. This would have left the company producing around two million barrels per day.
Murray Auchincloss who was appointed permanent chief executive by the group at the beginning of the year plans to abandon the target formally in February. This will be done when the company updates the market about its capital allocation strategy.
The move was reported as Brent crude, an international benchmark, rose to $80.50 per barrel, up 3.1 percent, for the first since August, as the conflict in Middle East intensified.
A BP spokesperson said: “As Murray stated at the beginning of the year, in our fourth quarter results, we will deliver as a more focused, simpler and higher value company.”
In July, when asked whether the company’s plans to reduce oil and gas production would be reconsidered, he replied: “I am not really focused upon production volumes. I am focused upon cash and earnings because I continue to tell that the market is what matters.”
Bluebell Capital, a activist investor who has been behind Glencore’s and BlackRock’s campaigns to stop investing in wind energy projects and increase oil and gas production, pressed the group earlier this year.
Giuseppe Bivona said, “This is what we asked them to do: An oil and natural gas company should be producing oil and natural gas, and not shrinking the business in order to reinvent itself with renewables.”
Hedge fund claimed that a “irrational strategy” aimed at phasing out fossil fuels quicker than competitors and society was destroying shareholder values.
Environmentalists have criticized the reports. Philip Evans, Greenpeace’s campaigner, said that the reports were “further evidence that we cannot let fossil fuel bosses decide the future of the planet”.
Auchincloss is trying to restore investor confidence, as BP shares have underperformed compared to their FTSE 100 peers Shell and international oil rivals.
The Canadian executive has laid out plans for saving at least $2 billion by the end 2026. It has also frozen all external hiring except for frontline positions, well site leaders, and other safety critical roles.
In an effort to reduce costs and simplify operations, the bidding process for new offshore wind projects was also halted. Resources have instead been focused on existing project in the UK, Germany and other European countries. BP has sold its ten US offshore wind farms last month , and left the market.
Shell shares have increased by 1.5 percent compared to BP’s 10 percent since the beginning of the year. BP shares closed 1.3 percent, or 5 1/4p higher, at 422p.
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