Bernard Looney’s sudden resignation as BP chief executive has cast greater doubts about the energy company’s strategy, with investors keeping a close eye on who will take over the top job. Look for clues.
Looney, who resigned on Tuesday after admitting he failed to disclose the extent of his past relationships with colleagues, has positioned BP as a leader in the energy transition, at least among traditional oil majors, by outpacing its peers in the company’s commitment to further. Invest in renewable energy.
But while some investors embraced the bold strategy he launched in 2020 shortly after taking office, others have long had doubts.
“We think investors remain unconvinced by this strategic shift,” said Biraj Borkhataria of RBC Capital Markets. “The bottom line is that the world has clearly changed since Bernard took over as CEO. Variety.”
BP’s shares lag behind those of its rivals, especially in the United States, where Exxon Mobil and Chevron have made slow progress on the energy transition. Meanwhile, British rival Shell, an oil and gas company under new chief executive Wael Sawan, is no longer unapologetic about its role in fighting climate change.
Equity research group Redburn Atlantic wrote: “Looney’s successor will face a dilemma. Stick to the strategy of transforming BP into a broader energy company and transformation leader. Or shift the focus to the higher-returning oil and gas business.”
Not everyone agrees.Adrian Frost, investment manager at Artemis, a top 25 firm
BP shareholder says nature of Rooney’s resignation – end
Past relationships with colleagues and disclosures to the board – rather than strategic differences – suggested the board should seek a “continuity candidate” who would not signal any significant change in BP’s strategy.
But whoever takes over will hope to put their own stamp on the company and its direction, which could lead to a greater commitment to renewable energy or a renewed focus on maximizing the most profitable parts of the business.
Leading the pack of runners and riders vying for the top job is Murray Auchincloss, who served as chief financial officer until this week and has been named interim chief executive.
The 53-year-old Scot is well-liked by investors and praised for knowing the ins and outs of the business, providing a useful foil to Rooney’s salesman-like side.
“He (Rooney) is a great ambassador for the company, but when you’re in trouble, he doesn’t perform well,” said one top 25 shareholder.
Jefferies’ Giacomo Romeo said BP Chairman Helge Lund could also be a potential partner as Statoil (now Equinor) and BG Group ’s former CEO joins.
However, people close to the Norwegian executive and chairman of Danish drugmaker Novo Nordisk have distanced themselves from the CEO role. The taint that oversaw Rooney’s appointment less than four years ago could work against him.
BP could appoint its first female chief executive, with Carol Howle, the head of the company’s powerful trading and transportation division, seen as a potential frontrunner, along with the head of BP Gas and Anja-Isabel Dotzenrath in Clean Energy.
Experience in the trading business is seen as very important within the company as it brings together many different parts of its business, from production to refining, and is a huge profit center. It is also considered critical to maximizing future returns from future renewable energy projects such as offshore wind and solar.
Bernstein analyst Oswald Clint said Gordon Birrell, head of production and operations, and Emma Delaney, head of customers and products, will also Join the campaign and emphasize that all key internal candidates are “fully invested in the current strategy.”
However, Jefferies’ Romeo said BP may break with tradition and hire outside staff.
Analysts said Maarten Wetselaar, the head of Spanish refiner Cepsa, could be an option. He lost the race for CEO of Shell to Saavan. “While the external appointment is unusual, the circumstances themselves are unusual,” Redburn Atlantic said.
The case for outside candidates may be bolstered by the fact that three of the last four BP CEOs have left under tense circumstances. Lord Browne resigned in 2007 for lying to a court about how he met his partner, while Tony Hayward resigned in 2010 over his response to the Gulf of Mexico oil spill.
The only recent CEO not to be a life member of BP (joined through the Amoco merger in 1998) is Bob Dudley, who resigned in 2020 after 10 years.
The board itself is likely to face investor questions about its processes and how it investigated Rooney’s personal relationships with colleagues before his appointment and during his time as CEO. A review of the executive in 2022 concluded that he did not violate the company’s code of conduct.
Jefferies’ Romeo said Looney’s departure could “rekindle” speculation about whether BP could become a potential takeover target by one of its rivals.
Although BP has a market capitalization of $111 billion, rivals may believe its assets can command higher valuations from shareholders under new management. The industry is flush with cash and oil prices have risen above $90 a barrel this month.
Rising oil prices, along with a broader energy crisis triggered by Russia’s invasion of Ukraine, coincide with a broader crunch in ESG investing.
BP still has unfinished business in Russia. Although it wrote off the value of its nearly 20% stake in Russian state-backed oil giant Rosneft shortly after the full-scale invasion of Ukraine, it technically still owns those shares. The sale was complicated by the need to seek Kremlin approval and dividends were piling up in the escrow account.
Analysts at Radburn believe the oil industry needs to stick to some of its decarbonisation commitments to “maintain its ‘social licence'”. They added: “However, there is room for change in the transformation trajectory and 2050 is still a long way off after all.”
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