Donald Trump's inaugural address as US president this week included a paean to fossil fuels and "liquid gold beneath our feet". Although BP has significant oil and gas operations and reserves in Texas and the Gulf of Mexico (or the United States), you have to dig deeper to find the gold in its finances.
The British company's current market capitalization lags behind that of other large investor-owned energy multinationals: not only is it a sixth of Exxon Mobil's market capitalization, but it is less than half the market capitalization of its older Anglo-Dutch rival Shell. The company announced last week it would cut 4,700 jobs in a renewed effort to become "a simpler, more focused, higher-value company."
But BP has made plenty of statements about its future over the years, but it also has a track record of disappointment. It has also replaced several CEOs, the latest of which is Murray Auchincloss, who just had to postpone a long-awaited strategy update for investors next month to move away from medical procedures recover from.
Auchincloss replaces Bernard Looney, who was fired in 2023 amid allegations of misconduct over past relationships with colleagues. "It's almost Shakespearean. The company has had bad luck," said one BP veteran. It has undoubtedly suffered a series of unfortunate events in its efforts to please investors and combat climate change.
The most serious setback was the 2010 Deepwater Horizon oil spill, which killed 11 workers, polluted the Gulf of Mexico and forced the company to sell assets to pay a $65 billion bill. The company took a long time to recover, and arguably never did: It still has $24 billion in net debt and only last year approved a sixth platform in the Gulf, a field it first discovered in 2006 .
Five years ago, Looney pledged that BP would reduce oil and gas production by 40% by 2030 and "reimagine energy for people and the planet." The claim was bolder in rhetoric than substance, but BP has been moving away from it ever since as high interest rates put an end to its vision of building wind farms cheaply.
The key is Vladimir Putin's full-scale invasion of Ukraine in 2022, forcing BP to give up its minority stake in Russian oil company Rosneft for $25 billion. It made so much money from its original joint venture with a group of oligarchs, TNK-BP, in the mid-2000s that it was eventually ousted. Like other countries, Russia was surprised.
But the company made its fortune, and BP couldn't simply claim bad luck. A common thread running through its recent history is that its ambitions and goals have outstripped its ability to put its plans into practice. ExxonMobil insists on the status quo, while BP is prone to wishful thinking.
This goes back to Lord John Browne, who as CEO transformed the company by acquiring Amoco and Arco in the US and the TNK-BP deal. He also brought a glimmer of wisdom to the strategy, including the little-evidenced notion that BP would “move beyond oil.” The slogan didn't last long, but its legacy is that every BP leader aspired to a vision.
BP is not a cowboy outfit. Despite Deepwater Horizon's failure, its operations are generally well managed and compliance is taken seriously. But it's more intelligence than instinct (one observer said, "There are a lot of smart people out there," which wasn't entirely a compliment). Another described it as "more of a country than a business" and lacked the fierce profit drive of its rivals.
The country's commitment to decarbonization was driven in part by social and government pressure following the 2016 Paris agreement to limit global warming. It also hopes to attract investment from ESG funds and benefit from the financial transformation. But it failed, and its response was not as quick as Shell's change of direction. The company has been troubled by poor financial results, executive changes and strategic indecision.
BP now faces a world in which Trump tells oil companies to “drill, baby, drill” and withdraws the United States from the Paris Agreement. Meanwhile, Greenpeace accused the company of “greenwashing” by not decarbonizing fast enough. If the past few years have proven anything, it's that it's impossible to please both parties, especially for an energy company headquartered outside the United States.
Three months before Deepwater Horizon, BP's market capitalization briefly surpassed that of Shell's, but now lags far behind. Many bankers wonder whether they can address a merger or acquisition. If BP wants to remain independent, it must show investors it can make things happen, rather than staring into the future. There is a situation called being too smart.
john.gapper@ft.com