BP Faces Pressure Against Investment in Energy Transition
BP plc BP has been asked to shift its focus back to oil and gas production and reduce spending on the energy transition process. BP’s plans to allow oil and gas production to decline 25% by the end of this decade (compared with 2019 levels) was not well received by the London-based hedge fund Bluebell Capital Partners.
According to Bluebell, the company’s shift from oil and gas production to renewable energy is a misguided move and is also the reason behind BP’s share price decline. BP’s shares are undervalued by at least 50%, according to Bluebell’s assessment and this is mainly due to the company shrinking its fossil fuel output and diversifying into sectors whose targeted returns may be potentially low.
BP is being urged by the hedge fund to increase its upstream output to 2.5 million barrels of oil equivalent per day (Mboe/d) by 2030 compared with 2.3 Mboe/d at present and up by a quarter from its decade-end goal of 2Mboe/d. Bluebell has also asked the British supermajor to curb cumulative investments by $28 billion in bioenergy, hydrogen and renewables & power through 2030. Additionally, the London-based investment activist has suggested a reorganization of BP’s board of directors.
According to BP, the company will retain its energy transition strategy while also continuing to invest in oil and gas. It will invest around $14-$18 billion every year till 2030 and more than half of this would be invested in oil and gas. According to a representative of BP, the company values its shareholders’ opinions and would contemplate its overall strategy with them over time.
In conclusion, Bluebell encouraged BP to rethink its strategy to transition toward cleaner energy as it is unrealistic and flawed.
Zacks Rank and Key Picks
Currently, BP carries a Zacks Rank #4 (Sell).
Investors might want to look at some better-ranked stocks in the energy sector, such as Oceaneering International OII, Repsol REPYY and Harbour Energy HBRIY. While both Oceaneering International and Repsol currently sport a Zacks Rank #1 (Strong Buy), Harbour Energy holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Oceaneering International is a market-leading supplier of offshore equipment and technology solutions to the energy industry. The company has projected an increase in free cash flows for 2024. The bright outlook is supported by the growing market demand for its mobile robotic forklifts and underride vehicles.
Repsol is a global multi-energy company, involved in exploration and production activities as well as refining and marketing petroleum products. The company is also actively involved in transitioning toward cleaner and more sustainable energy solutions. Recently, it announced the expansion of its network of renewable fuel refilling stations in Europe, demonstrating its commitment to a sustainable energy model.
Harbour Energy is a leading independent oil and gas company, primarily involved in upstream operations. Upon completion of the recently announced acquisition of Wintershall Dea asset portfolio, its estimated production will increase to 500,000 boepd. The company has also done well in reducing its debt in the past year.
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