BP CEO’s Exit Brings Strategic Impasse to a Head

LONDON, Sept 13 (Reuters Breakingviews) – Bernard Looney has left the building. BP’s (BP.L) chief executive resigned late on Tuesday after the UK oil giant’s board found he had not been sufficiently transparent about past relationships with company colleagues. While his exit appears unrelated to strategy, it puts Chair Helge Lund and the rest of BP’s board on the spot over the $112 billion group’s future direction.

On the face of it, BP’s strategy should be unaffected by Looney’s missteps. The Irish executive is leaving almost exactly three years after outlining ambitious plans for the company to hike its generating capacity of wind and solar energy to 50 gigawatts by 2030, and even more eye-catching plans to cut oil and gas production by 40% by the same date. While Looney subsequently revised the reduction in hydrocarbons to 25%, BP remained more committed to the energy transition than European rival Shell (SHEL.L) or U.S. giants Exxon Mobil (XOM.N) and Chevron (CVX.N). Only last week, the CEO told Reuters that the company was “holding its nerve” on the shift away from fossil fuels.

Yet BP’s pivot has been far from strife-free. Since the start of Looney’s tenure in February 2020, BP shares have returned 31% including dividends, compared with 46% for Shell and 129% for Exxon. His strategy looked fine when oil prices were well below $60 a barrel, but less so after the fallout from Russia’s invasion of Ukraine pushed prices to twice that level. Exxon and Chevron currently trade at around 6 times expected EBITDA for 2023 – double BP’s lowly valuation. New Shell boss Wael Sawan has already embraced a more oil-friendly strategy and walked back low-carbon targets.

Lund and board colleagues may be minded to do the same. Investors suspect Looney overpaid in wind power auctions in the UK and Germany. Along with Norway’s Equinor, BP has been seeking a 54% hike in the price at which it can sell power from its U.S. schemes. Looney’s replacement may have to follow Vattenfall and Orsted in writing down the value of BP’s wind assets.

A U-turn would be awkward, though. Given Looney’s exit appears unrelated to his strategy, the assumption is that executives still support BP’s plan to lift capital expenditure on low-carbon projects to $7 to $9 billion out of a total outlay of $14 billion to $18 billion by 2030. On Tuesday the International Energy Agency said demand for oil and gas would peak by the same date. The risk for BP is that Looney’s sudden departure leads to another ill-timed strategic shift.

BP CEO Bernard Looney resigned after failing to fully disclose details of past relationships with colleagues, the oil giant said on Sept. 12.

Chief Financial Officer Murray Auchincloss will act as CEO on an interim basis, the company said.

BP said its board of directors had received and reviewed allegations in May 2022 from an anonymous source relating to Looney’s conduct, regarding personal relationships with company colleagues prior to becoming CEO. No breach of company code was found, but the board sought and was given assurances by Looney about disclosure of past personal relationships, as well as his future behaviour.

But the company said it has recently received “allegations of a similar nature”, and had investigated. It said Looney stepped down after he accepted that he had not been fully transparent.

BP’s U.S.-listed shares were down 1.3% as of 2030 GMT on Sept. 12.