LDN - Business

BP halts hiring, slows renewables roll-out to win over investors

[June 27, 2024] By Ron Bousso

LONDON (Reuters) - BP's new CEO Murray Auchincloss has imposed a hiring freeze and paused new offshore wind projects as he places a renewed emphasis on oil and gas amid investor discontent over its energy transition strategy, sources at the company said.

The moves, which have not previously been reported, are part of a decision by Auchincloss to slow down investments in big budget, low-carbon projects, particularly in offshore wind, that are not expected to generate cash for years, said several sources at BP who declined to be named.

They mark a stark reversal from the direction the CEO's predecessor Bernard Looney took to rapidly move away from fossil fuels. This has weighed on BP's shares as returns from renewables shrank, while profits from oil and gas soared in the wake of the COVID-19 pandemic and Russia's invasion of Ukraine.

BP has reassigned dozens of people tasked with identifying new renewables opportunities to projects already underway such as offshore wind in Britain and Germany, three sources said.

Auchincloss and Chief Financial Officer Kate Thomson have prioritised investing in and even acquiring new oil and gas assets, particularly in the Gulf of Mexico and in the U.S. onshore shale basins, where BP already has large operations, company sources briefed on the matter said.

BP will also consider investing in biofuels and some low-carbon businesses that can generate returns in the short term. Earlier this week, BP agreed to buy grain trader Bunge's 50% stake in Brazilian sugar and ethanol joint venture BP Bunge Bioenergia for $1.4 billion

It is also expected to make some job cuts in renewables, although no specific targets have been given, the sources said, adding that BP has imposed a company-wide hiring freeze, with only a few exceptions including frontline and safety personnel.

Auchincloss has promised a pragmatic approach since taking over in January, four months after Looney resigned for failing to disclose relationships with employees.

In May Auchincloss announced a $2 billion cost saving drive by the end of 2026 relative to 2023. The 53-year-old also cut his executive leadership team from 11 to 10 members.

BP said in a statement to Reuters that Auchincloss introduced six priorities "to deliver as a simpler, more focused and higher value company".

The priorities include focusing the business and delivering "the next wave of efficiencies and BP's growth projects".

"The actions we are taking are part of delivering this - and of course are all in service of our aim of growing the value of BP," it said.

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Plants line the lounge of British multinational oil and gas company BP at their booth during the LNG 2023 energy trade show in Vancouver, British Columbia, Canada, July 13, 2023. REUTERS/Chris Helgren/File Photo

BP's most high profile external hire under Looney was Anja-Isabel Dotzenrath, a former head of RWE Renewables who joined in 2022 to lead its renewables and gas division but stepped down for personal reasons in April.

Her successor, veteran BP executive William Lin, is expected to put a greater focus on gas operations when he takes over in the coming months, two sources said.

Shares in BP have underperformed rivals in recent months, raising speculation that it could be a takeover target.

That has piled pressure on Auchincloss as he seeks to reassure investors who are juggling the need to decarbonise the global economy with rising near-term demand for fossil fuels.

BP spent $2.5 billion on renewables, hydrogen, EV charging and biofuels in 2023, out of a total capex of $16 billion.

BACK TO BLACK

BP is the only major oil company to have oil and gas output reduction targets. Shell last year shifted its strategy to focus on high-return business, scaling back investments in many renewables and low-carbon energy businesses.

In February 2023, BP slowed its cornerstone pledge to cut oil and gas output between 2019 and 2030 from 40% to 25%. It kept its 2030 renewables targets, including the development of 10 gigwatt of installed capacity.

Auchincloss last month further softened the language on the 2030 target.

In another sign of change, BP has hired several new staff to its exploration team, headed by Bryan Ritchie since May, as it tries to replenish its reserves in order to sustain and even grow output.

BP is also allocating more capital and workforce to developing new fields such as the Kaskida, Tiber and Gila discoveries in the Gulf of Mexico.

In recent weeks it also overhauled its mergers and acquisitions division by combining it with the business development division under Sam Skerry, three sources said.

Last October BP said it had 18 billion of barrels of oil and gas equivalent in resources which represent 20 years of its current production that could be developed to sustain its 2022 production level within its returns target.

(Reporting by Ron Bousso; Editing by Alexander Smith)

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