BP Faces Calls from Hedge Fund to Abandon Clean Energy Focus

BP is currently facing pressure from a hedge fund, Bluebell Capital Partners, urging the company to abandon its strategy of reducing oil and gas production in favor of a focus on clean energy investments. The London-based hedge fund has communicated its concerns to BP, claiming that the company's current strategy has negatively impacted its share price and is based on an "utterly unrealistic" expectation of a drastic decline in oil and gas demand.

Under the leadership of former CEO Bernard Looney, BP had already initiated substantial changes, aiming to reduce oil output by 25% compared to 2019 levels by the end of the decade. This commitment positioned BP as the only major oil company pledging to decrease output, although it had scaled back its initial ambitions. In addition to the reduction in oil production, the company had been actively investing in green energy sectors, including solar, wind, and biofuels. BP was also exploring opportunities in green hydrogen production as part of its strategy to generate revenue post a predicted decline in oil demand.

Despite these efforts, BP is still being guided by individuals who support Looney's strategic vision. Chairman Helge Lund appointed Murray Auchincloss, Looney's former finance chief, as the new CEO. Bluebell Capital Partners, though a relatively small fund with approximately $150 million in assets across a limited number of companies, has a history of influencing major corporate decisions. Previously, the fund has been involved in campaigns against companies like French food giant Danone, contributing to the departure of its CEO, and Glencore, where its efforts to persuade the commodities company to sell its thermal coal operations were unsuccessful. However, the fund's financial size may not be sufficient to compel BP into a shareholder vote.

Bluebell clarified that its stance is not against clean energy but rather advises BP to avoid ventures where it lacks a competitive edge or where returns are anticipated to be low, such as in solar and offshore wind projects. The fund emphasized its commitment to constructive engagement and noted that its members were "passionate environmentalists."

In contrast, BP appears to be standing by its current strategy, indicating that it welcomes constructive engagement with shareholders. The company reported receiving support for its approach in recent discussions with most major shareholders. It also highlighted that any potential disagreement with shareholders would likely be addressed through dialogue rather than legal action.

The situation draws parallels with ExxonMobil, which is currently facing legal action in an attempt to dismiss a resolution for its upcoming annual meeting. Bluebell expressed confidence that its position would garner significant shareholder support and attributed BP's share price underperformance compared to peers to the decision to reduce dividends in 2020.

As the dynamics between BP and Bluebell unfold, the energy company finds itself at a critical juncture, navigating the balance between traditional fossil fuels and the burgeoning realm of clean energy, while addressing the concerns of influential shareholders.