Donald Trump’s inaugural speech as President of the United States featured praise for fossil fuels, labeling them as the “liquid gold under our feet.” In contrast, BP, with its substantial oil and gas interests in Texas and the Gulf of Mexico, struggles with financial performance.
Currently, BP’s market valuation is behind its major competitors, representing only a fraction of ExxonMobil’s worth and less than half that of Shell. Recently, BP announced a workforce reduction of 4,700 jobs as part of an initiative to become a “simpler, more focused, higher value company.”
Historically, BP has announced numerous ambitious plans for its future, yet has frequently disappointed stakeholders. The company has seen several leadership changes, most recently Murray Auchincloss, who has had to delay a strategic update for investors due to a medical procedure.
Auchincloss followed Bernard Looney, who was dismissed in 2023 after allegations of misconduct related to personal relationships with colleagues. BP veterans have noted the company’s misfortunes, likening its situation to a Shakespearean tragedy. The organization has faced various challenges as it attempts to meet investor expectations and address climate change.
Among the most significant setbacks was the Deepwater Horizon disaster in 2010, which resulted in the deaths of 11 employees, environmental damage in the Gulf of Mexico, and a financial burden of $65 billion from asset sales. Since that incident, BP has not fully recovered, currently holding a net debt of $24 billion and only approving its sixth platform in the Gulf last year after discovering it in 2006.
Five years ago, Looney vowed that BP would decrease oil and gas output by 40% by 2030 and reimagine energy solutions. However, the company has shifted further from these ambitions, influenced by rising interest rates that hampered the feasibility of its renewable energy projects.
The 2022 invasion of Ukraine by Vladimir Putin forced BP to divest its minority stake in the Russian oil company Rosneft, incurring losses of $25 billion. Previously, BP had benefitted significantly from its partnership with Russian oligarchs through its TNK-BP joint venture, but the company experienced an abrupt exit from the market.
Despite the string of challenges, it is essential to recognize that BP’s difficulties are not solely due to external factors. The company has consistently exhibited ambition, often outstripping its capacity to turn plans into reality. Unlike ExxonMobil, which operates with a pragmatic approach, BP tends to engage in idealistic thinking.
This culture of ambition can be traced back to former CEO Lord John Browne, who expanded BP through significant acquisitions and introduced a vision of moving “beyond petroleum.” Although this slogan has faded, each subsequent leader at BP has yearned for a similar visionary framework.
While BP manages its operations effectively overall, including strict compliance measures, it has been described as overly intellectual and lacking the aggressive profit-driven mentality typical of its competitors. The company’s commitment to reducing carbon emissions was, in part, a response to societal expectations following the Paris Agreement in 2016. Unfortunately, this strategy did not yield the expected outcomes, nor did BP adapt as quickly as some rivals like Shell.
In the current climate, BP faces pressure from both sides: adherents to fossil fuel expansion, as endorsed by Trump, and environmental advocates accusing it of insufficient action on decarbonization. The company’s struggles highlight the difficulty of satisfying both sides, particularly given its international headquarters.
Notably, BP’s market valuation once briefly surpassed Shell’s shortly before the Deepwater Horizon disaster, but it has since fallen significantly behind. Financial analysts may ponder the possibility of mergers or acquisitions, yet for BP to maintain its independence, it needs to demonstrate tangible progress rather than merely envisioning potential outcomes. Excessive intellectualism can prove to be a hindrance.
photo credit: www.ft.com
