Pressure on BP’s chief executive Murray Auchincloss to deliver stronger returns to investors may be easing as the company shows signs of recovery and announces a major oil discovery off the coast of Brazil. After a challenging period marked by leadership upheaval and activist investor pressure, there is growing optimism that BP is regaining stability under Auchincloss and its newly appointed chairman Albert Manifold, who took over on October 1.

BP’s third-quarter financial results, expected on Tuesday, are anticipated to reveal an increase in production compared to the previous quarter, although output remains below last year’s levels. Broker estimates suggest revenue for the three months to September could reach £47.8 billion. The company has emphasised the importance of continuing cost savings, reducing its substantial debt pile of £19.8 billion, and maintaining share buybacks. While Auchincloss's position appears secure for now, the new chairman Manifold—known for his strong focus on shareholder returns during his previous role at CRH—is under pressure to ensure BP delivers on these promises, with executive changes being a possibility if performance falters.

BP’s recent difficulties followed the departure of former CEO Bernard Looney and chairman Helge Lund, both key drivers of the company's earlier ambitious green energy pivot. That strategy has since undergone a rapid scale-back amid growing scepticism about net-zero policies and a shift back towards traditional oil and gas activities. This turnaround, combined with activist investor Elliott Management’s demands—which still holds a 5% stake—sparked intense speculation of a potential takeover by UK rival Shell earlier this year. However, Shell categorically denied any interest in a merger, triggering a six-month lock-up period that restricts new bids until Boxing Day. Despite this, comments from Shell's CEO Wael Sawan hint at continued interest in deals on a smaller scale, leaving open the possibility of a future approach.

Strategically, BP sought to share the risks of developing its newly discovered oilfield in Brazil with Shell through a joint venture. Shell declined the offer, a decision that may now be questioned given the find’s scale. BP’s vice president of production, Gordon Birrell, described the Brazil discovery as twice as large as originally estimated, making it the firm’s largest find in 25 years and reinforcing its reputation as a leader in oil exploration. This success adds confidence to BP’s more expansive spending plans, which currently range between £12 billion and £13.7 billion annually—higher than the £10.7 billion to £11.4 billion Elliott Management prefers.

BP’s stronger share price reflects this cautious optimism, having risen almost 20% over the past year and boosting the company’s market valuation by nearly £10 billion since hitting a low in April. Several major project start-ups in oil and gas have contributed to this improved performance, alongside better reliability in plants and refineries.

However, challenges remain significant. Auchincloss has pledged to generate £2.3 billion to £3 billion from asset sales this year to reduce debt, but a general decline in oil prices, combined with a muted appetite for green energy investments amid criticism of net-zero strategies, may hinder these efforts. BP’s balance sheet has been under long-term pressure, especially since the catastrophic Deepwater Horizon spill in 2010, which cost the company £50 billion, and a further write-down of £18 billion in its Russian oil stake Rosneft following the Ukraine conflict.

Although the recent share price recovery and the pause in takeover buzz provide some relief, the company’s leadership cannot afford complacency. Ongoing debates about capital expenditure, debt management, and the strategic balance between oil and renewables will continue to shape investor confidence and BP’s future direction.

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  • Paragraph 4 – [1] Daily Mail, [5] Wall Street Journal
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  • Paragraph 7 – [1] Daily Mail, [7] Reuters

Source: Noah Wire Services