Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
BP boss Murray Auchincloss dismissed speculation the British energy major could become a takeover target amid a wave of consolidation in the oil and gas sector as he defended the company’s performance despite a steep drop in third-quarter profits.
Auchincloss, who was named interim chief executive in September after Bernard Looney resigned over his past romantic relationships with colleagues, said BP was focused on its strategy and not concerned that recent multibillion-dollar acquisitions by ExxonMobil and Chevron could encourage a larger rival to make a bid for $110bn BP.
“I don’t feel vulnerable, in fact I feel quite confident,” Auchincloss said, noting that despite the leadership upheaval, BP was trading at a similar multiple of earnings to European peers and had begun to close the valuation gap with US rivals over the past 12 months.
Exxon’s $60bn takeover of Pioneer Natural Resources in early October, followed two weeks later by Chevron’s $53bn deal for US operator Hess, has sparked predictions by analysts and dealmakers of more transactions as rival producers look to gain scale.
However, Auchincloss added that BP would not follow Exxon and Chevron in acquiring additional oil production either. “I don’t need more resources in the United States and now would not be the time that I’d want to do it as I’d prefer to go countercyclical [and buy when oil prices are low],” he said.
Auchincloss spoke to the Financial Times on Tuesday as BP reported underlying earnings of $3.3bn, missing market expectations of $4bn and down from $8.2bn a year earlier. BP shares fell 3 per cent to 509.60p by late morning in London.
Despite the drop in profits from the record levels set last year Auchincloss pointed to a strong operational performance in the third quarter, with oil and gas production 3 per cent higher than last year and production costs 6 per cent lower.
“Overall the company was operating very well and the miss was isolated to gas trading,” he said.
High gas storage levels in the US and Europe had reduced price volatility compared with the first half of the year, limiting trading opportunities for BP’s gas division, he said.
In a setback for its offshore wind ambitions in the US, BP booked a $540mn impairment on two projects off the coast of New York after authorities rejected its request to renegotiate the terms of the associated power purchase agreement due to higher costs and permitting delays.
BP and its partner Equinor are still assessing the impact of the decision, Auchincloss said, adding that BP remained committed to offshore wind, particularly in basins such as the UK and Germany where it can use the electricity to supply its own facilities and charging networks.
BP continued with its share buyback programme, announcing plans to repurchase another $1.5bn of stock. The company has committed to using 60 per cent of 2023 surplus cash flow for buybacks.
BP, like its rivals, has used record profits in the past 18 months to repurchase billions of dollars of its own stock, which the company views as undervalued. It left its dividend unchanged after raising it in the second quarter.
BP’s board, led by chair Helge Lund, has launched a search for a permanent replacement for Looney. Auchincloss, who was chief financial officer under Looney, is a potential candidate, as are several senior BP women. BP has never had a female chief executive.
“Helge has not guided on the timeline, so we just continue to focus on the day jobs,” Auchincloss said.
Credit: Source link
