BP is under significant pressure to chart a new course and move past a challenging period as it gears up to announce its full-year financial results this week. The company is anticipated to follow in the footsteps of its industry peers by reporting a decline in annual profits, marking the third consecutive year of falling global oil prices, which have experienced their sharpest drop since the Covid pandemic.
Analysts from the City project that BP's profit will hover around $7.5 billion (£5.5 billion), a decrease from nearly $9 billion in 2024. This decline is primarily due to an expected downturn in fourth-quarter earnings, particularly after crude oil prices dipped below $60 per barrel for the first time in almost five years.
Meg O’Neill, who is set to take the reins as BP's chief executive in April, will face mounting demands from investors to articulate a fresh strategic vision. Activist shareholders are increasingly urging the oil giant to brace itself for a prolonged decline in the demand for fossil fuels.
Recently, a coalition of investors, spearheaded by the Australasian Centre for Corporate Responsibility and including the workplace pension scheme Nest, submitted a resolution calling on BP to clarify how it plans to regulate its expenditures on oil and gas projects in the future.
In addition, Dutch shareholder activists from Follow This are pressing BP to outline its strategy for generating shareholder value amid a landscape of decreasing fossil fuel demand. Last year, BP initiated seven new oil and gas projects, returning its focus to fossil fuels in a bid to revive its fortunes after previously attempting to diversify through substantial investments in renewable energy. Remarkably, five of these projects were completed ahead of schedule.
Citi analysts recently informed clients that BP's stock has outperformed its European competitors by 4.4%, equating to an additional $4 billion in equity value over the past six months. They anticipate that Shell’s notable exploration successes off Brazil's coast could enhance its valuation by an estimated $15 billion to $20 billion.
"We believe that all the necessary elements exist for a significant shift in narrative," Citi remarked. However, it is important to note that shareholder activists and environmental organizations are gearing up to challenge BP’s investments in new fossil fuel ventures. Their argument centers on the belief that such projects are unlikely to be financially viable, especially as the rise of electric vehicles and the transition to clean energy continue to diminish the need for oil and gas.
Mark van Baal, the founder of Follow This, stated, "The incoming CEO must devise a strategy that addresses the waning oil and gas markets globally." The International Energy Agency predicts that oil demand may start to decline around 2030, even when considering the most conservative projections for global energy consumption.
Follow This emphasized that the newly filed resolution, introduced before BP’s annual meeting in April, is intended to amplify shareholder pressure and highlight the financial instability associated with fossil fuel business models.
Van Baal commented, "The strategy in recent years has been inconsistent, shifting from one extreme to another. In our view, BP did not falter because they moved too swiftly towards green energy, as they have suggested. Rather, they stumbled due to a complete lack of clarity in their strategic direction."
