BP boss can’t afford slip-up on shares

Slick messaging doesn’t make an investment case. Take the efforts of Murray Auchincloss at BP. The oil group’s boss says he’s made “significant progress” in making the business “simpler, more focused and higher value”. Really? On the first two, maybe a bit. But the third?
Auchincloss was thrust into the hot seat in September last year on the abrupt exit of his predecessor Bernard Looney: the fellow thrown out and docked £32.4 million pay after taking the company’s “performing while transforming” mantra to heart and then failing to keep the board abreast of his myriad in-house conquests. Back then, the shares were 508p. The price now, despite the efforts of the former finance chief, Auchincloss, to turn the group into Buyback Petroleum? Just 379¼p, down another 5 per cent on the third-quarter results.
True, the falling oil price hasn’t helped. Despite the conflict in the Middle East, it’s down over that period from just over $90 a barrel to about $71. Yet, under Auchincloss, BP shares have still underperformed Shell and TotalEnergies by about 20 per cent. They’ve lagged ExxonMobil’s by about a quarter.
Why? Well, the latest figures are as good a clue as any. On the face of it, they’re decent enough. Despite its lowest quarterly profit since Covid — an underlying $2.3 billion — BP topped forecasts, even if Jefferies analysts called it a “low-quality beat”, with profits from operations broadly in line. Operating cashflow of $6.8 billion underpinned both the latest $1.75 billion buyback — so hitting this year’s $7 billion target — and eight cents dividend.
On the simplification and focus fronts, there are signs of progress too. Auchincloss says 2020 to 2023 was a period of exploring “options to see what was possible”. The answer? He’s now axed 24 “potential projects”, including 18 in hydrogen, for a new era of “delivery and execution”. Neither, he says, does that imply BP was wasting money, not least on random green stuff. Written off costs, he says, equate to “four exploration wells”. He’s also on track to cut $2 billion costs by the end of 2026.
Drill into things, though, and there was more strategic and financial drift: an endemic issue under chairman Helge Lund, whose tenure since 2019 has seen too many lurches in faddish directions. Auchincloss says that, in oil and gas, he sees “the potential to grow through the decade with a focus on value over volume”. So, does that mean he’s junked Looney’s target to cut fossil fuel production by 25 per cent by 2030 — itself cut from an initial 40 per cent? Who knows. He merely says he’ll focus on “value not volume”, including new projects in the Gulf of Mexico and Azerbaijan, with an update to come at February’s full-year results.
Investors must wait until then, too, to learn that, with net debt up to $24.3 billion, they’re unlikely to get the $14 billion buybacks rashly promised only in February for this year and next. In an absurd bit of doublespeak, BP says its plans are “currently unchanged” but that “elements of our financial guidance” are being reviewed by February, “including our expectations for 2025 share buybacks”. Why not just break the bad news now? Analysts have already pencilled in as little as $4 billion for buybacks next year.
Where is the clarity? Auchincloss insists the “vast majority of shareholders are very supportive of our direction of travel”. And that, as he delivers improving cashflow, the shares will pick up. But just now BP looks like an underperforming takeover target. If he fails to change that soon, he’ll be over a barrel.
Rearranging the deckchairs? Limbering up for geopolitical fisticuffs? Making the famously bureaucratic business less cumbersome? Or a mix of all three? The big reorganisation of HSBC’s newish boss Georges Elhedery has triggered all kinds of theories since he unveiled his overhaul last week.
So, at least the third-quarter figures gave him a chance to try and kill some of them off. Elhedery is carving up the bank into “eastern” and “western” sections, with a standalone Hong Kong and UK retail bank and other businesses split between the “eastern markets” of Asia-Pacific and the Middle East and the “western” ones of the UK, Europe and the Americas.
Hence one theory. That under the guise of cost-cutting he was giving himself options for a split, should trade wars between China and a possible Trump regime turn HSBC into an even bigger geopolitical football. His answer to that? “This is not a precursor, or intention, or preparation for any split.” Neither was there any “geopolitical reason”, he said, for his revamp.
So, just a bit of “streamlining” at a bank that, despite falling net interest income, lifted quarterly profits by $800 million to $8.5 billion, thanks to strong figures from its wealth wing, while lobbing in another $3 billion share buyback. His key aim? To get quicker decision-making, take out a management layer, not least cutting the 18-strong executive team to 12, and bring senior bods closer to regional money flows. Still, his overhaul looks sensible insurance if the geopolitics really do kick off.
It’s been an eventful time for the world’s most famous burger chain: an onion-induced E. coli outbreak plus McDonald Trump turning up, uninvited, to serve fries at one of its Pennsylvania eateries. Unrelated events, just to be clear, even if the arrival of the former president forced the company to declare apolitically: “We are not red or blue — we are golden.” Still, amid talk that the chain’s got too pricey, underlying sales fell 1.5 per cent last quarter, their biggest decline in four years. McDonald’s is pushing a $5 meal deal to win punters back, while playing down the E. coli impact. For now, at least, the chips are down.