Here we go again. Just when you thought BP was trying to generate less drama, the new chair has decided a new chief executive is needed. Say goodbye to Murray Auchincloss, who junked the green-ish transition strategy of his predecessor as recently as February. Meg O’Neill, the American boss of the Australian group Woodside Energy, becomes BP’s first outside hire as chief executive.
At face value, a new appointment should not be an outright surprise. Albert Manifold arrived as BP chair in July and, after the many flip-flops under the ineffectual Helge Lund, he had a mandate to take his own view of how the company should be managed. If he and the board think an injection of “increased rigour and diligence” is necessary to fulfil the new oilier plan, fair enough. The activist investor Elliott may have been urging much the same. Even Auchincloss recognised the possibility he could be axed. His statement said he had told Manifold of his “openness to step down” if a new leader was identified.
Yet there is still a puzzle here on two counts. First, Auchincloss had seemed to be making progress on the share price front. As the co-author, as finance director, of his predecessor’s green-tinged approach, he was forever tainted in the eyes of the stick-to-hydrocarbons camp of investors. Yet this year’s “reset” strategy to boost investment in oil and gas and cut funding for clean energy projects served up most of the U-turns demanded by the City. BP’s shares, helped by a big oil and gas find in Brazil, are up 10% this year, in line with Shell and better than Chevron.
Second, O’Neill’s record of producing shareholder value at Woodside isn’t much to shout about. Yes, there has been vigorous deal-making on her watch, and lots of dividends have been paid, but Woodside’s share price performance is actually worse than BP’s since April 2021. Her run-ins with climate activists in Australia will reinforce the message that BP is serious about its strategic U-turn, but that has not been in doubt for the past year. The point is that Woodside is not an obvious example of how to produce knockout returns. She spent 23 years climbing the ladder at the big beast ExxonMobil, which may have grabbed BP’s attention, but Woodside is the company she has been running for the last four.
BP’s share price was unmoved on the news that, as Manifold put it, the change at the top is “an opportunity to accelerate” the plan for a “simpler, leaner and more profitable company”. Yes, but how exactly? BP is carrying a bigger debt burden than most of its rivals, which limits pace. The current aim is to sell its lubricants business Castrol and a share of its solar developer Lightsource. Even with a push from a newcomer, however, the shape of the balance sheet won’t be clear until 2027. The latest challenge is a falling oil price.
Or maybe the Manifold/O’Neill vision is for a deeper round of disposals. What BP calls “mobility” – petrol stations, in old money – could come into the frame. But one assumes O’Neill has primarily been hired as a cost-cutter. Until shareholders see how her numbers differ from Auchincloss’s, however, there is not much to go on. He was also chanting the “leaner” mantra.
O’Neill arrives in April, and investors will have to wait a few months after that for hard targets. Maybe she will turn out to be the perfect turnaround merchant and the person who finally kills the speculation that BP’s destiny is to be taken over by a bigger rival – even if Shell isn’t currently volunteering. Certainly, a culture shock of some sort seems to be intended. It is just not clear what exactly.
