BP to slash green spending, pivot back to oil

The struggling British energy company announced the moves Wednesday as part of a much-anticipated strategy update aimed at winning over investors. Those include activist hedge fund Elliott Management, which recently took a stake in BP with a view to pushing for significant changes.

“We have fundamentally reset BP’s strategy,” Chief Executive Murray Auchincloss said. Higher investment in oil-and-gas fields would enable BP to pump high-margin fossil fuels for years to come, he said, adding that the company would be very selective in the investments it makes in the energy transition.

BP shares fell about 1% in morning trading in London. Auchincloss is set to lay out further details of his plan to revive the energy giant at a presentation to investors later Wednesday.

The context

BP’s shares have lagged behind those of rivals Shell, Exxon Mobil and Chevron since the company took the most aggressive steps by an oil major to shift toward lower-carbon sources of energy in 2020. That bet backfired when fossil-fuel consumption roared back after the early days of the pandemic and prices rocketed when Russia invaded Ukraine.

Since taking the helm of BP in the fall of 2023, Auchincloss has dialed back BP’s hydrogen and biofuel plans, put its onshore-wind business in the U.S. up for sale and launched a cost-cutting drive. He has also greenlighted several big oil-and-gas investments and secured quick-and-easy access to barrels in Iraq and elsewhere.

But BP has struggled to reduce its debt load and the moves have failed to ignite its share price, leading to speculation among bankers that a rival could swoop in for parts—or the entirety—of the business.

Companies in sectors from oil to autos have struggled to calibrate the pace of the energy transition as governments have wavered in efforts to curb climate change. President Trump began dismantling the Biden administration’s climate-focused initiatives soon after taking office in January.

The details

BP began to row back on some of its green commitments two years ago when it said it would produce more oil and gas this decade than previously planned, but the strategy it set out Wednesday went much further.

BP said it would increase oil-and-gas investment to about $10 billion a year, with the aim of boosting daily output to up to 2.5 million barrels by 2030, from about 2.3 million last year. It will invest up to $2 billion a year in businesses geared toward the energy transition, more than $5 billion lower than the company had previously forecast.

The London-listed oil producer said it was targeting $20 billion of asset sales by 2027 as part of a push to cut its debt pile. The divestments could include BP’s lubricants business, Castrol, which the company said it was reviewing with all options on the table.

Write to Joe Wallace at joe.wallace@wsj.com.