Elliott Takes Stake in Struggling Oil Giant BP
The activist hedge fund is encouraging BP to consider more dramatic moves than it has made so far to restore the once venerable company’s fortunes
Activist hedge fund Elliott Management has built a stake in British oil major BP BP 0.99%increase; green up pointing triangle and will push for transformational changes to improve the company’s performance, according to people familiar with the investment.
The U.S. hedge fund, which manages around $70 billion in assets, is one of Wall Street’s most influential investors, known for pressuring companies to fire management, break apart and spin off businesses, all with the goal of increasing shareholder returns.
The size of Elliott’s BP stake couldn’t be learned. Elliott is encouraging BP to consider more dramatic moves than it has made so far to restore the once venerable company’s fortunes, the people said.
The U.K. oil company’s strategy has whipsawed in recent years. It pivoted away from its traditional oil and gas businesses five years ago in favor of low-carbon energy investments such as wind, solar and electric-vehicle charging.
BP shares have lagged behind those of bigger rivals such as Shell and Exxon Mobil, spurring many BP investors privately to call for a new battle plan. Its market value of around $87 billion is less than half of Shell’s and less than one-fifth Exxon’s.
BP sharply cut its dividend in the pandemic and has been battling back ever since. It has struggled to reduce high debt levels and cut costs. Elliott’s arrival will add to executives’ concerns that the clock is ticking to improve BP’s performance.
BP has trumpeted what executives see as meaningful signs of progress and growth in areas like Iraq and the Gulf of Mexico, where BP is a dominant player. Executives have argued for more time to show they are on the right track, according to people involved in discussions with investors.
Last month BP said it would cut about 4,700 jobs, or more than 5% of its global workforce, and slice contractor numbers. It also warned that disappointing refining margins and other factors could leave as much as a $300-million hole in fourth-quarter profit. Its full earnings release is scheduled for Feb. 11.
The company has looked to cut costs further by bringing in partners for offshore-wind projects and by putting a Germany refinery and U.S. onshore-wind business up for sale.
Elliott’s stake, earlier reported by Bloomberg News, adds to the mounting challenges facing BP Chief Executive Murray Auchincloss, a veteran company finance executive named to the top job 13 months ago. He took over as interim boss after the previous CEO, Bernard Looney, was ousted over his failure to disclose details about past relationships with colleagues.
Auchincloss was widely labeled by investors and analysts as the continuation candidate for the role. BP’s chairman and other key board members stayed, underscoring the efforts by BP and Auchincloss to squelch expectations for a drastic change in course.
In private meetings with investors late last year, Auchincloss and other senior BP officials signaled that the company wasn’t planning dramatic strategic changes. They were responding to stepped-up criticism of the company’s performance, according to people who attended the meetings.
At a strategy update scheduled for Feb. 26, Auchincloss is expected to try to reassure investors that BP will rejigger how it spends money to take more advantage of its global oil and gas footprint and massive trading business.
With a 48-year record of shaking up companies, the Florida- and New York-based Elliott, which also has a London office, is famous for its deep dives into corporate structures and management and its knack for rallying other investors to its causes. Recent targets have ranged from Starbucks and Southwest Airlines to sprawling industrial icons.
Last year, Elliott amassed a $5 billion stake in Honeywell International and sought to break apart one of America’s last surviving industrial conglomerates. Honeywell’s shares had underperformed the broader market. Earlier this month, Honeywell said it would split into three independent companies.
Elliott isn’t the first to agitate against BP. Last year a tiny London hedge fund, Bluebell Capital Partners, attacked BP’s commitment to shrinking oil-and-gas production while boosting investment in less-profitable green-energy sources. Bluebell also called for replacing BP’s chairman, Helge Lund, a key backer of BP’s earlier pivot to low-carbon energy. Lund didn’t respond to a request for comment Sunday.
BP largely brushed off the criticism, telling investors it had shareholders’ support and didn’t need an activist weighing in. Though small, Bluebell struck a chord with other investors. Bluebell later closed its public funds.