London-based supermajor BP Plc was one of many producers to report windfall profits for 2022 during earnings season in February. It was a jaw-dropping $28 billion for the year that doubled from the previous year and a record annual figure in the company’s 114-year history.
BP CEO Bernard Looney said during the company’s fourth-quarter 2022 and year-end webcast that the results were indicative of the company’s execution of strategic plans laid out three years ago to pivot from its 110-year history of being an international oil company to becoming an integrated energy company.
“I am personally in awe of what the BP team has delivered since then,” Looney said. “And all during the most volatile and uncertain times that many of us have ever experienced.”
Our international managing editor, Pietro Pitts, listened to the call and reported for Hart Energy that management is forecasting production to be largely flat in 2023 relative to 2022. By 2025 and 2030, production is expected to reach 2.3 MMboe/d and 2 MMboe/d, respectively. The latter figure would represent a 25% decline compared to 2019, while a previous forecast called for reducing production by 40%.
The reductions didn’t stop there. BP is also dialing back its pledge to reduce carbon emissions by 40% in 2030.
“We are now targeting 10% to 15% reduction by 2025 and aiming for 20% to 30% reduction by 2030,” Looney said. “We continue to believe that our ambition and aims taken together are consistent with the goals of the Paris Agreement.”
Despite Looney’s assertion that BP still aims to reduce its total emissions to net zero by 2050, the blowback from climate activists was swift.
Bruce Duguid, head of stewardship at Federated Hermes, told Reuters that investors are concerned by the apparent “pivot.”
“It also raises a significant governance question, given the high proportion of investors that supported the original (emission reduction) target only nine months ago,” he said.
Still, Looney insists that BP’s direction was set three years ago and remains unchanged.
“Our change was done, and we were now 100% focused on delivery, and that is exactly what we have been doing,” he said during the call with investors.
“The first and [most] important is that BP is performing. Our businesses are running well. Our costs are being controlled. We are reducing emissions. We are growing value,” he said. “We feel and believe our strategy is working, and we are more confident than ever that what we laid out in 2020 as a strategy is the right one.”
Looney spoke to Alan Murray at Fortune in what could be viewed as an attempt to stem the potential backlash.
“There are two things that need to happen in this world,” he told Murray. “No. 1, we need to accelerate the energy transition. And No. 2, that transition needs to be orderly.”
True, but perhaps equally important but often left out of the conversation: the transition—as well as corporate pledges to make it happen—need to be realistic.
It could be that the folks who invest in BP stock already get this. Prior to Looney’s revelations, BP’s stock price at market close on Feb. 6 was $34.84 per share. That value had increased to $40.88 per share at closing on Feb. 15.
A 17% increase in stock performance within a week isn’t too shabby; when you throw in the fact it took place amid controversy, it’s probably a message.
Looney told Murray that the proof of BP’s commitment to emissions reductions is evident in its investments: building out solar facilities, hydrogen innovation and investing in biogas.
“People will not judge us on our words, they will judge us on our actions,” he said. “While I understand that people are skeptical, I would encourage people to look at the facts.”
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