By Ron Bousso
LONDON (Reuters) – BP has softened its pledge to cut oil and gas production by 2030, aiming to reassure investors about its energy transition strategy and narrow the value gap with rivals.
CEO Murray Auchincloss has in recent months shifted the London-based company’s strategy to focus heavily on returns. He was less categorical than his predecessor Bernard Looney on BP’s transition to renewable and low-carbon energy.
BP shares are now lagging Shell, TotalEnergies, Exxon Mobil and Chevron on a number of key metrics, reflecting concerns that BP is not investing in the most competitive segments. most profitable of its activity, mainly oil and gas.
Auchincloss did not abandon a flagship target announced by Looney in 2020, before watering it down in 2023, according to which BP would reduce its oil and gas production by around 25% between 2019 and 2030, to 2 million barrels of oil equivalent per day (boe). BP is the only major oil company to have set reduction targets, and the commitment has worried some investors.
Speaking to Reuters on Tuesday after BP reported a first-quarter profit of $2.7 billion, Auchincloss said BP could over- or under-achieve the 2030 target.
“Two million (boed) is a decent number to remember at the moment. Could it be higher? Yes. Could it be lower? Yes.”
PRAGMATIC APPROACH
Auchincloss, who took office in January after Looney’s surprise resignation last September, said he would take a pragmatic approach.
BP has more than 30 projects in its operations that it will have to decide whether to pursue in the coming years, Auchincloss said.
“And as we make these decisions on a yields-based approach, that will help us determine what we think our production will be in 2030, but I’m focused on yields and cash flow, not volume,” Auchincloss said.
In February, he said he expected BP production to increase 2% to 3% through 2027.
Earlier this year, Shell CEO Wael Sawan also watered down the company’s emissions reduction targets, citing expectations of strong gas demand and uncertainty over the energy transition, as it also seeks to strengthen Shell’s shares.
Biraj Borkhataria, head of European research at RBC Capital Markets, said he expected BP to increase its spending on oil and gas production, the so-called upstream.
“BP has emphasized that it is focused on returns and, therefore, I would expect the next iteration of the capital allocation strategy to incorporate higher upstream investments (capital expenditures) and allocation weaker in certain aspects of its transitional growth drivers.”
“Overall, this should result in upstream volumes above the 2 million boe target in 2030,” Borkhataria said.
(Reporting by Ron Bousso; editing by David Gregorio)
