Ron Busso
LONDON (Reuters) – New BP (NYSE:) Chief Executive Murray Auchincloss has imposed a hiring freeze and suspended new offshore wind projects as he refocuses on oil and gas amid investor dissatisfaction with the energy transition strategy, company sources said.
The moves, which have not previously been reported, are part of Auchincloss’s decision to slow investment in big-budget, low-carbon projects, particularly offshore wind, that are not expected to turn a profit for years, several BP sources said. who refused to give his name.
They mark a sharp departure from the direction of predecessor CEO Bernard Looney, who had committed to a rapid transition away from fossil fuels. That has weighed on BP shares as renewable energy revenues have fallen and oil and gas profits have surged in the wake of the COVID-19 pandemic and Russia’s invasion of Ukraine.
BP has reassigned dozens of people tasked with identifying new renewable energy opportunities for projects already underway, such as offshore wind in Britain and Germany, three sources said.
Auchincloss and Chief Financial Officer Keith Thomson are prioritizing investing in and even acquiring new oil and gas assets, particularly in the Gulf of Mexico and onshore U.S. shale basins where BP already has major operations, company sources briefed on the matter said.
BP will also consider investing in biofuels and some low-carbon businesses that could be profitable in the short term. Earlier this week BP agreed to buy the grain trader Bunge (NYSE:) 50% stake in Brazilian sugar and ethanol joint venture BP Bunge Bioenergia for $1.4 billion.
Some job cuts in the renewable energy sector are also expected, although no specific targets have been specified, the sources said, adding that BP had imposed a company-wide hiring freeze, with some exceptions including frontline and security officers.
Auchincloss has promised a pragmatic approach since taking office in January, four months after Looney resigned over failure to disclose employee relationships.
In May, Auchincloss announced $2 billion in cost cuts by the end of 2026 compared to 2023. The 53-year-old has also reduced his management team from 11 to 10 people.
In a statement to Reuters, BP said Auchincloss had laid out six priorities “to become a simpler, more focused and more profitable company.”
Priorities include focusing the business and delivering on “BP’s next wave of performance and growth projects.”
“The actions we are taking are part of achieving this goal – and, of course, they all serve our goal of increasing the value of BP,” it said.
BP’s most high-profile external hire under Looney was Anja-Isabelle Dozenrath, the former head of RWE Renewables, who joined the company in 2022 to head its renewables and gas division but left in April for personal reasons.
Her successor, veteran BP chief executive William Lin, is expected to put more emphasis on the gas operation when he takes office in the coming months, two sources said.
BP’s shares have lagged rivals in recent months, prompting speculation that the company could be a takeover target.
That has added to pressure on Auchincloss as he tries to reassure investors who are juggling the need to decarbonize the global economy with rising near-term demand for fossil fuels.
In 2023, BP spent $2.5 billion on renewables, hydrogen, electric vehicle charging and biofuels, out of a total capex of $16 billion.
BACK TO BLACK
BP is the only major oil company that has targets to reduce oil and gas production. Shell (LON:) changed its strategy last year to focus on high-yield businesses, cutting investment in many renewables and low-carbon energy businesses.
In February 2023, BP slowed its cornerstone commitment to cut oil and gas production between 2019 and 2030 from 40% to 25%. It maintained its renewable energy targets by 2030, including developing 10 gigawatts of installed capacity.
Auchincloss last month further softened the 2030 target.
In another sign of change, BP has hired several new staff to its exploration team, led by Brian Ritchie since May, as the company tries to replenish its reserves to maintain and even increase production.
BP is also devoting more capital and labor to developing new fields, such as the Casquida, Tiber and Gila fields in the Gulf of Mexico.
The company has also overhauled its mergers and acquisitions unit in recent weeks, merging it with a business development unit led by Sam Skerry, three sources said.
Last October, BP said it had resources of 18 billion barrels of oil and gas equivalent, equivalent to 20 years of its current production, that could be developed to maintain production levels in 2022 within its return target.