BP Breakup Pressure Mounts as Elliott Takes Stake

BP's shares surged on Monday, February 10, 2025, following reports that activist hedge fund Elliott Investment Management had acquired a stake in the British oil giant. The size of Elliott's holding has not been disclosed, but its involvement is already fueling speculation about potential changes to BP's strategy and leadership. This development comes as BP struggles to keep pace with its peers and faces mounting pressure to transform its business.

BP's stock climbed to 462p from its Friday close of 433.25p, marking a significant rebound from its November low of 367p. However, the company's shares have fallen nearly 10% over the past year, lagging behind rivals such as Shell, which remained largely unchanged in trading. Elliott's move could result in a major shake-up at BP, including potential changes to its board and strategy.

Analysts believe Elliott's move could lead to significant changes at BP, including a potential change in the chairperson at the very least. RBC Capital Markets analyst Biraj Borkhataria suggested that "any activist would call for a change in the chairperson at the very least." BP has been chaired by Helge Lund since 2019, and the company recently postponed an investor day to February 26, citing CEO Murray Auchincloss' recovery from a medical procedure. The event is expected to be crucial as Auchincloss lays out his vision for BP's future, amid growing investor concerns over the company's direction.

Jefferies analysts believe Elliott could push for BP to scale back its investments in low-carbon assets and exit certain retail markets. Instead, the hedge fund is likely to advocate for a renewed focus on upstream oil and gas projects to maximize cash flow generation. BP stock's underperformance has fueled calls for transformation, and Elliott is expected to advocate for what it calls "transformative measures" to unlock shareholder value.

BP has struggled to keep pace with its peers, with its stock declining nearly 8% over the past five years while rivals such as Shell and TotalEnergies have gained about 30%. Investors have grown increasingly frustrated with BP's strategic direction, particularly as it pivots toward renewable energy and away from traditional fossil fuels. Last month, BP issued a trading update warning of higher corporate costs, lower refining margins, and one-off charges linked to its bio-ethanol acquisition. The company is also looking to sell its German refinery assets and recently announced plans to cut 4,700 jobs as part of a broader effort to achieve $2 billion in cash savings by 2026.

Elliott is expected to advocate for significant changes at BP, which could include selling off its renewables energy assets, doubling down on oil and gas, and pushing for a new chairman. Wells Fargo’s analysts also raised the prospect of a full break-up of the British oil major, which it said could unlock billions of pounds in value for investors. A splintering of BP would likely draw significant political attention given its importance to the UK's economy. The company has 16,000 British staff and is the country's fifth largest publicly listed company.

Shares in BP surged more than 7pc on Monday after it emerged over the weekend that Elliott had built a stake in BP. Elliott has declined to comment on the size of its stake or its intentions but Bloomberg, which first reported the investment, said the hedge fund was preparing to push for "transformative measures."

Roger Read at Wells Fargo said Elliott was most likely preparing a letter to shareholders outlining its criticism and its suggested remedies. The analysts wrote: "Based on our experience with Elliott taking activist positions within our coverage universe, the letter would be the next big thing. In the letter, we would expect Elliott to illustrate both BP’s alleged shortcomings and a clear path to increase value (likely through some combination of reorganisation/cost reductions, divestment(s), significant debt reduction). Following those efforts, Elliott would likely expect BP to return significant cash to shareholders."

Elliott, which was founded in 1977 by billionaire Paul Singer, currently controls $70bn of assets. It has successfully campaigned for change at some of the biggest companies in the world, including Starbucks and BHP. The activist fund last year led a successful campaign that saw industrial giant Honeywell split up into three separate companies.

BP's upcoming investor day on February 26 will be a critical moment for the CEO to outline how he plans to address concerns about BP's direction and underperformance. With Elliott now involved, investors will be watching closely to see whether BP takes a more aggressive approach to restructuring or faces increased pressure to make leadership changes.

In conclusion, BP faces significant pressure to transform its business as activist hedge fund Elliott Investment Management takes a stake in the company. The hedge fund's history of pushing for significant corporate changes suggests that BP could be in for a major shake-up, potentially including a breakup or a renewed focus on upstream oil and gas projects. Investors and other stakeholders will be watching closely to see how BP responds to Elliott's involvement and the potential strategic shifts that could follow.