The sudden resignation of BP PLC (LSE:BP.)'s CEO, Bernard Looney, has left the oil giant vulnerable to acquisition, according to analysts from Barclays.
Looney's departure came in the wake of a board investigation into allegations related to his personal relationships with colleagues. While no breach of BP's Code of Conduct was identified, the lack of full disclosure led to his exit.
Echoes of the past
Barclays analysts point out that this is not BP's first leadership crisis. In 2007, then-CEO Lord John Browne resigned under similar circumstances. At that time, BP's share price initially rallied, although it eventually levelled by year's end, drawing parallels to the current situation.
Leadership and value gaps
With CFO Murray Auchincloss stepping in as interim CEO, Barclays suggests that BP's board will likely explore various avenues for value creation. The leadership gap, coupled with BP's undervalued status, could make the company an attractive target for corporate interest.
Sunak roadblock?
The analysts note that any foreign takeover attempts would likely be blocked by the UK government under the National Security Investment Act.
However, they also highlight that the current UK Prime Minister, Rishi Sunak, leads a faltering government, which could be a significant factor in how events unfold.
Strong fundamentals
Despite the leadership turmoil, Barclays maintains that BP's portfolio is robust and capable of generating significant free cash flow. It describes BP as "the most misunderstood and undervalued company" in its coverage universe, with forecasts suggesting an uptick in free cash flow in the latter half of the year.
At 3.35 pm, the shares were off 2.8% at 508p, wiping £2.4bn off the value of the business.