BP abandons target to cut oil production

BP is preparing to drop an ambitious target to cut its oil and gas production by the end of the decade as it battles to close a valuation gap with rivals in the energy industry.
The FTSE 100 oil company introduced a goal to reduce its oil and gas output by 40 per cent by 2030 and boost spending on renewables under Bernard Looney in 2020. The former chief executive was forced to resign last year after failing to disclose the full extent of his personal relationships with colleagues.
The target was first reduced in February last year, after a dramatic rebound in commodities prices, to a 25 per cent cut in production compared with 2019 levels, which would leave the company producing about two million barrels a day.
Murray Auchincloss, who became permanent chief executive at the start of this year, is planning to formally abandon the target in February, according to Reuters, when the group updates the market on its capital allocation strategy.
Reports of the move came as Brent crude, the international benchmark, pushed above $80 a barrel for the first time since August as the conflict in the Middle East escalated, rising 3.1 per cent to $80.50 a barrel.
A spokeswoman for BP said: “As Murray said at the start of the year in our fourth-quarter results, the direction is the same but we are going to deliver as a simpler, more focused and higher-value company.”
When asked in July whether the company would rethink its plans to cut oil and gas production, he said: “I’m not really focused on production volumes; I’m focused on cash and earnings as I continue to tell the market that’s what counts.”
Earlier this year the group faced pressure from Bluebell Capital, an activist investor behind campaigns at Glencore and BlackRock, the world’s largest asset management group, to increase its oil and gas production and stop investing in any more “ill-conceived” wind projects.
Giuseppe Bivona, co-chief investment officer at Bluebell, said: “This is exactly what we asked of them: an oil and gas company should produce oil and gas, not shrink the business to reinvent itself in renewables.”
The hedge fund said that an “irrational” strategy aimed at transitioning away from fossil fuels faster than rivals, and society, was destroying shareholder value.
The reports have provoked criticism from environmentalists. Philip Evans, a campaigner at Greenpeace, said it was “further proof that we cannot leave the future of our planet in the hands of fossil fuel bosses”.
Auchincloss, 54, is attempting to rebuild investor confidence as BP’s share price has underperformed compared with its FTSE 100 peer Shell and international oil and gas rivals.
The Canadian executive has set out plans to save at least $2 billion in costs by the end of 2026 and has frozen external hiring, except for frontline roles, well-site leaders and other safety-critical roles.
Bidding on new offshore wind projects has also been halted in an attempt to simplify operations and cut costs. Instead, resources have been focused on existing projects in the UK and Germany. BP sold its ten US onshore wind farms last month and exited the market.
Shares in BP have fallen by 10 per cent since the start of the year compared with a 1.5 per cent increase in Shell’s share price. BP shares closed 1.3 per cent, or 5¼p, higher at 422p.