Elliott Investment Management, a well-known activist hedge fund, has reportedly acquired a significant stake in BP Plc, the British oil giant, as the company grapples with a prolonged period of underperformance and struggles to regain investor confidence. According to sources familiar with the matter, Elliott is pushing BP to consider transformative measures to boost shareholder value, reflecting the fund’s belief that the company is currently undervalued and underperforming. While the exact size of Elliott’s stake remains undisclosed, the move marks the latest high-profile intervention by an activist investor in the energy sector. Representatives for both Elliott and BP declined to comment on the matter.
BP has faced significant challenges in recent years, with its stock price falling approximately 8% over the past five years, even as its major rivals, such as Shell Plc and Exxon Mobil Corp, have seen their shares rise by at least 30% during the same period. The company’s struggles intensified under former CEO Bernard Looney, who bet heavily on a net-zero strategy, aligning with the global shift toward renewable energy. However, this approach appears to have misfired, as oil demand did not peak as anticipated, leaving BP without a clear direction for a turnaround. Today, BP’s market value stands at around $86 billion, less than half of Shell’s valuation. The company’s lack of a cohesive strategy has left investors frustrated and increasingly impatient.
In an effort to stabilize the company, BP’s board ousted Looney late last year due to personal conduct issues and appointed Murray Auchincloss, a veteran insider, as the new CEO. Auchincloss is widely expected to unveil a more pragmatic strategy during BP’s highly anticipated update on February 26, with a likely shift back toward oil and gas. This reversal would align with the current market realities, where demand for fossil fuels remains robust despite the global push toward decarbonization. However, investor patience is wearing thin, particularly after BP warned in October that its share buybacks—a key tool for returning capital to shareholders—could slow in 2024. The company is set to report its fourth-quarter financial results on Tuesday, with preliminary indicators suggesting broad weakness across its operations.
The decision by Elliott to take a stake in BP is part of a broader trend of activist investors targeting major energy companies. In recent years, high-profile campaigns have reshaped the strategies of industry giants. For instance, Exxon Mobil faced a significant challenge from ESG-focused Engine No. 1 in 2021, while Dan Loeb’s Third Point LLC pushed for structural changes at Shell, advocating for the breakup of its liquefied natural gas, renewables, and marketing divisions into a standalone business. Elliott itself has a proven track record of driving change, having successfully lobbied for the breakup of Honeywell International Inc. earlier this year. The fund has also been involved in other high-profile campaigns, including a stake in Anglo American Plc during BHP Group’s attempted takeover of the London-based miner.
Elliott’s history of activism in the energy sector is equally impressive. The fund has previously targeted companies such as NRG Energy Inc. and Canadian oil producer Suncor Energy Inc., pushing for operational and strategic overhauls to unlock shareholder value. Its involvement in BP is likely to intensify the pressure on Auchincloss to deliver a clear and actionable plan to reverse the company’s fortunes. BP’s underperformance has led some analysts to speculate about the possibility of a takeover, with names such as Shell, ConocoPhillips, or TotalEnergies SE being floated as potential suitors. A merger with Shell, in particular, could create a British-Dutch energy giant, leveraging significant cost savings and growth opportunities in the U.S. market.
In the meantime, BP is taking steps to reduce its expenses and streamline operations. Auchincloss announced plans last month to cut about 5% of the company’s workforce, part of a broader cost-cutting effort aimed at improving financial flexibility. Additionally, BP has paused or halted 30 projects since June 2023, focusing resources on its most profitable ventures. These moves reflect the urgent need for transformation within the company, as it seeks to reclaim its position as a leader in the energy sector. However, with Elliott now in the mix, the pressure on BP to deliver results is likely to intensify, setting the stage for a pivotal moment in the company’s history. The outcome of this high-stakes effort will not only determine BP’s future but also resonate across the global energy industry as it navigates the complexities of the transition to a post-fossil fuel economy.
