BP PLC (LSE:BP.) shares climbed 7% in afternoon trading following reports that activist investor Elliott Management has taken a stake in the company, increasing pressure for strategic and leadership changes.
Analysts suggest chairman Helge Lund could be a key target for removal.
BP’s upcoming strategic review on February 26 now takes on added significance, with Citi analysts saying it “may have new impetus.”
They highlight a potential reset of BP’s low-carbon ambitions, which have taken up 20% of net investment in five years without delivering strong returns. CEO Murray Auchincloss has already started shifting focus back to traditional oil and gas.
Upstream investment
Market analysts expect greater investment in upstream projects to boost cash flow and a likely board shake-up.
BP has faced criticism for its 2020 pivot to low-carbon energy, which investors say has weighed on its stock performance. The news comes shortly after the group announced 5% job cuts as part of a cost-saving push.
RBC Capital says the UK oil major's main problem has been poor capital allocation and recent strategy changes, which have weakened its earnings potential.
Its investments in growth areas have not delivered meaningful profit increases. Looking ahead to 2025, BP is expected to fall well short of its EBITDA targets, due to weaker market conditions and internal challenges.
Reducing leverage
"In our view, BP should be reducing its leverage levels substantially, leaving it with more capacity to act countercyclically over time," RBC said in a note to clients.
"However, this would require a substantial cut to distributions in the near term, which may be negative for its shares.
"In sum, the bottom line is the introduction of a serious activist in BP shares is likely to cause some agitation for those underweight the shares, and we expect this to result in positive share price performance in the near term."
In afternoon trading, the stock was up 29.53p at 462.78p.
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