(Bloomberg) — Hedge fund Bluebell Capital Partners called on BP Plc to bolster investments into oil and gas and cut spending on clean energy, saying the company’s shift away from fossil fuels is misguided and weighing on the share price.
Most Read from Bloomberg
BP should spend $1.5 billion a year more through 2030 on oil and gas production and halt any further investment in renewables and power, the London-based investment firm said in an October letter to Chairman Helge Lund that was seen by Bloomberg. It reiterated its demands in another letter on Jan. 26.
The activist campaign adds to pressure on BP’s new chief executive officer, Murray Auchincloss, named this month to replace the architect of the strategy shift, Bernard Looney. Bluebell, known for agitating for change at Danone SA, said it would have called for Looney’s resignation had he not left in September after admitting he’d failed to fully disclose past relationships with colleagues.
BP’s strategy is flawed because the company is aiming to cut fossil fuel output to support a global objective of having net zero carbon emissions by 2050, a policy goal that is increasingly unrealistic, the hedge fund said.
“BP is preparing to operate in a world that BP should know will not exist,” Bluebell’s co-founders, Giuseppe Bivona and Marco Taricco, wrote in the October letter.
The firm urged the company to reduce cumulative investment in bioenergy, hydrogen and renewables & power by $28 billion through 2030.
BP’s stock is worth at least 50% more than the current price, and the discount is mostly due to the strategy of shrinking oil and gas, Bluebell said, while “rapidly promoting a risky diversification into sectors with lower targeted returns and where BP has ‘no right to win’ on the other.”
BP’s strategy is still to move into clean energy, but amid that shift it will continue to invest in oil and gas, Gordon Birrell, the company’s executive vice president for production and operations, said at the Baker Hughes Annual Meeting in Florence, Italy on Monday. Of the $14 billion to $18 billion BP will invest each year to 2030, more than half will go into oil and gas, he said.
Auchincloss is pragmatic and BP’s capital framework will respond to the pace of the transition, Birrell said.
“We’ve been exploring and experimenting the last few years, but I think we’re getting clear on the types of businesses we want to be in, because we can’t be in everything,” Birrell said. “We like our shareholders, of whichever scale, to have a voice” and BP will debate its strategy with them over time, he said.
Shares of the company rose 0.9% to 465.8 pence in London. The Financial Times reported the Bluebell letter earlier.
Bluebell in recent years launched campaigns against high-profile companies including French food group Danone, Toronto-based cinema chain Cineplex Inc., British drugmaker GSK Plc and German chemical producer Bayer AG.
Many analysts welcomed Auchincloss’s appointment and the continuity it represented for BP’s energy-transition strategy. Yet he faces skepticism from investors that he can solve the company’s long-term challenges, notably a wide valuation gap with US peers that have maintained a greater focus on oil and gas.
(Updates with comment from BP executive in eighth paragraph.)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.