Three ways BP can regain investors' trust
BREAKINGVIEWS-Three ways BP can regain investors' trust The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Yawen Chen
LONDON, June 12 (Reuters Breakingviews) - Albert Manifold's abrupt departure has left BP BP.L with another credibility problem. The $113 billion oil group insists its strategy, which pre-dated the former chair's arrival, is unchanged. Yet his exit deprives the oil major of a key driver of its fossil fuel pivot and a fierce cost-cutter. It could also make BP more vulnerable to a takeover.
When Manifold arrived last October, he said he found a company that "lacked strategic cohesion and direction". Since then, BP has pivoted more decisively to fossil fuels, cut costs, sold assets and appointed a new CEO, Meg O'Neill. Still, in a statement after his unglamorous exit, Manifold called bullying accusations "lies", and said his priorities of improving the business and shareholder returns were "not always shared by everyone". BP must reassure investors.
Firstly, the group can address Manifold's hints of corporate waste, including chauffeur-driven cars or private planes. BP says it has cut $2.8 billion of expenses since 2023. However, inflation and spending to reverse declining oil production offset that by about $2 billion, so underlying operating expenditure has fallen by only $750 million, according to company reports. Last year, BP's combined production, manufacturing and distribution expenses edged above the $43 billion reported in 2024. That would make more sense if earnings were rising. Instead, costs as a percentage of adjusted EBITDA rose to 115% from near-100% in 2023. O'Neill could push for deeper savings independent of divestments.
Second, BP could speed up portfolio sales and show its focus. Under Manifold, the group completed the sale of a majority stake in Castrol at a $10 billion valuation. But it still has businesses that don't fit easily with the new oil and gas focus, such as renewables, or where it lacks a clear competitive advantage, like retail. The marketing business, for example, which includes retail sites outside the U.S., UK, Australia, Spain and the Netherlands, is estimated by Goldman Sachs analysts to be worth $33 billion. That could be used to cut debt.
The third test is governance. Manifold said in his letter that he tried to "refresh" the board and pushed for a review of its workings. Since its 2025 strategic reset, the board has added only three fresh faces to its 10-person board, excluding Manifold: Dave Hager, former CEO of Devon Energy DVN.N; Ian Tyler, now BP's interim chair; and O'Neill. It still includes people associated with the previous strategy, such as former E.ON EONGn.DE CEO Johannes Teyssen, appointed in 2021 under former Chair Helge Lund, and Diageo DGE.L executive Hina Nagarajan, who joined in 2023. BP could add more directors with oil and gas or restructuring experience.
BP is stronger than a year ago, yet a chair vacuum could still make it vulnerable to bidders. It need not unveil a new strategy, but can show the existing one will be pursued as determinedly after Manifold as before.
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CONTEXT NEWS
BP said on June 9 that company veteran Gordon Birrell would lead its upstream unit and Richard Harding will be interim head of the downstream unit as part of the firm's previously announced organisational change into two main business segments.
Top BP investors and former executives said they remained in the dark about the precise circumstances that led to the departure of former Chair Albert Manifold, the Financial Times reported on June 9.
(Editing by Neil Unmack; Production by Streisand Neto)
((For previous columns by the author, Reuters customers can click on CHEN/yawen.chen@thomsonreuters.com))