BP could be forced to change its management, list in the US or even break up after the activist hedge fund Elliott Management built a stake in the UK oil major, leading investors have warned.
“Radical options will now be on the table, and perhaps even likely,” said David Cumming, head of UK equities at Newton Investment Management, pointing to a potential break-up. “BP risks losing control of its agenda. Change is inevitable now,” he added.
While the size of Elliott’s stake in BP is unknown, the hedge fund’s reputation as a force for change boosted the oil major’s share price by 7 per cent on Monday.
Other investors said that at a minimum, BP would have to refocus on its core oil and gas business after years of building a wide range of green energy projects.
“The returns from some of those newer, lower-carbon businesses haven’t been that great. They’ve put money in and it doesn’t look like they’re going to get a sensible return on it,” said a top 25 shareholder.
“Whether you need to break the business up, I’m not sure; I think it’s more about what the strategy is, that’s likely to be what they’re driving, rather than necessarily having to carve it up,” the shareholder added.
He said that Helge Lund, BP’s chair, had presided over “a period of fairly poor performance and strategic drift”. While stopping short of calling for Lund to go, the shareholder said there was “a question mark against him”.
Biraj Borkhataria, an analyst at RBC Capital Markets, said calling for a change in BP’s chair would be the “very least” that an activist would do. Lund has held the role since 2019.
The top 25 shareholder speculated that Elliott might also want to move BP’s listing from London to New York, where there was “a deeper pool of capital” and investors who were less concerned about environmental worries.
Before Monday’s rise, BP’s share price had declined almost 10 per cent in the past year while investors criticised its underperformance and uncertainty over its strategy.
BP reports quarterly results on Tuesday and will update investors on its medium-term strategy at a capital markets day event on February 26.
Last month, Murray Auchincloss, BP’s chief executive, delayed the strategy update and moved it from New York to London after undergoing an undisclosed medical procedure.
Another top 20 investor said: “Elliot is probably investing at quite a good time because the company is already making changes.”
