BP slashed planned investment in renewable energy and said Wednesday that it would increase annual oil and gas spending to $10 billion, in a major strategy shift aimed at boosting earnings and shareholder returns.
The oil giant cut planned annual investment in energy transition businesses by more than $5 billion, compared with its previous forecast, to between $1.5 billion and $2 billion per year.
“We will be very selective in our investment in the transition, including through innovative capital-light platforms. This is a reset BP, with an unwavering focus on growing long-term shareholder value,” CEO Murray Auchincloss said.
Under Auchincloss’ predecessor, Bernard Looney, BP (BP) pledged in 2020 to cut oil and gas output by 40% while rapidly growing renewables by 2030. BP lowered the reduction target to 25% in 2023.
BP now aims to grow oil and gas production.
Across the energy sector, major companies that shifted their position in response to the need to lower carbon emissions and curb climate change have returned their focus to oil and gas, where returns have become easier to obtain as fossil fuel prices have rebounded from Covid-19 pandemic lows.
BP is seeking to regain investor confidence after underperforming its peers and has come under added pressure to make transformative changes after activist investor Elliott Investment Management built a stake in the company.
“The refocus on hydrocarbons is positive for BP as is the overall lower spending, which is driven by lower renewable spending,” said Allen Good, director of equity research at Morningstar.
“Along with the asset divestitures it should improve the balance sheet and returns. However, there still is little, if any, production growth,” Good said.
BP said it was reviewing its lubricants business, Castrol, and targeting $20 billion in divestments by 2027.
The company plans to raise its dividend by at least 4% per share annually and expects first-quarter share buybacks of $750 million to $1 billion.
