While BP has maintained its pace of buybacks this year, investors may start worrying about how long it can continue doing so. Photo: Christopher Pike/Bloomberg
Shares in BP fell to the lowest in close to two years as investors punish the company for shifting away from the oil and gas business.
That may put pressure on new CEO Murray Auchincloss to retreat from a strategy he helped develop under his predecessor Bernard Looney. Even as the world moves to low-carbon power sources to combat climate change, BP’s profits overwhelmingly depend on a still-growing market for fossil fuels, helping to fund the company’s dividend payouts and share buybacks.
“BP pivoted hard toward the energy transition under Bernard Looney around the time of maximum interest in green energy solutions and very low interest rates,” said Henry Tarr, an analyst at Berenberg. “Since then commodity prices have recovered, making the legacy upstream business seem more attractive, while higher interest rates and more competition has left some low-carbon businesses looking less attractive.”
Shares in the oil major fell as much as 1.4% Thursday to 424.55 British pence (R100), the lowest level since September 2022.
The drop in BP’s stock contrasts with its British peer Shell, which also set a goal under its previous chief executive to diversify away from fossil fuels and reach net-zero carbon emissions by the middle of the century. But under current CEO Wael Sawan, who took over the top job at the beginning of last year, the company has adopted what he called a ruthless approach to investment, focused on delivering returns for shareholders. The company has since pulled back on its plans to cut CO2 emissions and invest in renewable power generation.
The approach has helped push Shell’s stock up about 16% since Sawan became CEO, compared to a 10% drop for BP during that period.
While BP has maintained its pace of buybacks this year, investors may start worrying about how long it can continue doing so.
“Compared to its number one peer, Shell, there’s an increasing concern of sustainability of returns,” said Will Hares, an analyst at Bloomberg Intelligence. “The market wants to see more of a commitment to essentially their cash engines, which are oil and gas.”
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