The boss of BP insists investors will ‘love’ his radical plans to revive the struggling oil giant – but the jury remains very firmly out.
Announcing a ‘fundamental reset’ of the company, chief executive Murray Auchincloss slashed spending on renewable energy and promised to plough more into more profitable fossil fuels.
He hopes the move will not only boost profits but also put a rocket under a share price that has languished behind others in the industry for years – including arch-rival Shell.
‘In the long run, investors will love this,’ Auchincloss declared confidently.
The update will leave many savers wondering if now is the time to buy into BP or look for better options.
And those who already own BP shares will want to know if this is the tonic they have longed for or yet another disappointment – and a signal to sell.
The instant reaction on the stock market was far from encouraging for Auchincloss and shares fell by almost 3 per cent.
This matters for millions of savers who do not own BP shares outright as the stock is a staple among the pension funds looking after the retirement pots of vast swathes of the British workforce.
The jury remains out in relation to BP boss Murray Auchincloss’s plans
City experts said the Auchincloss masterplan could be too little too late for BP to close the valuation gap with London-listed rival Shell and US competitors ExxonMobil and Chevron.
And, despite Auchincloss’ pledge, analysts were hesitant on whether retail investors should pile into BP.
According to Richard Hunter, head of markets at Interactive Investor, BP’s grand plan was met with a ‘disappointed shrug of the shoulders’.
After the past few years, this was the last thing Auchincloss – or long-suffering shareholders – will have wanted.
BP shares have risen just 8pc over the last five years. Shell – which was quicker to row back on green commitments – has risen nearly 59pc.
In the US, Exxon Mobil shares have rocketed 113pc over the same time frame, while Chevron’s stock has soared more than 67pc.
City analysts are not convinced the strategy reset was a turning point for BP that could allow it to close the gap with Shell and its American rivals – or offer an opportunity for investors.
Included in Auchincloss’s update was the announcement that BP will slash shareholder returns in the short term.
Shares fell by almost 3 per cent after the plans were revealed
BP’s stock has risen by just 8pc in the last five years
In the fourth quarter of last year, BP bought back £1.4billion of shares from investors to boost its price.
This programme has been cut to between £600m to £790m for the first three months of 2025.
Kathleen Brooks, research director at online broker XTB, said that was a ‘tough pill for investors to swallow’.
She went on: ‘For now, the reaction to the reset has been tepid, and we do not think that this alone can boost the share price or narrow the valuation gap with its peers. The problem for BP is that it flip-flopped away from net zero and back to oil and gas too late.’
Auchincloss promised higher returns in the future but did not provide a timeline for investors.
Eventually, he plans to return between 30pc and 40pc of operating cash flow to shareholders through buybacks and a ‘resilient’ dividend, which is expected to increase by 4pc a year.
‘In the near term, shareholder returns for BP are now lower than peers,’ said RBC Capital Markets analyst Biraj Borkhataria.
But he suggested it will take some time for a more complete picture to emerge.
‘To us, much of the release looks to be BP making the right calls for the long term, but it may not please investors today,’ said Borkhataria.
Maurizio Carulli, an energy analyst at Quilter, said: ‘Ultimately, this is a big change in direction from BP as it looks to shift the negative momentum of the past.
‘It is going to be vital, for investors, that more detail on each component of its strategy reset is frequently communicated while it is being implemented, so that progress and success can be properly judged.’
Lindsey Stewart, director of stewardship research at Morningstar Sustainalytics: ‘It’s still uncertain whether BP’s green rollback proves to be a boon for its shareholders.
‘There’s probably a lot there to keep shareholders happy in the short term, but what about longer-term growth?’
So what should investors do?
Of the 24 City analysts that cover BP shares, four rate it a ‘strong buy’ and five say ‘buy’. A further 13 say ‘hold’ the shares if you already have them. But one says investors should ‘sell’ while another rates the shares as a ‘strong sell’.
Many commentators believe there are better options – certainly for now.
Allen Good, director of equity research at Morningstar, put it succinctly. ‘The new strategy makes BP more attractive, but not on par with US firms or even Shell,’ he said.
RBC’s Borkhataria added: ‘We continue to see better risk-reward elsewhere in the sector.’
And Interactive Investor’s Hunter went on: ‘As BP begins its new strategic journey and with much to prove, it seems unlikely that the market consensus which has Shell as the preferred play by some distance will change any time soon.’
So, as investors ponder what to do with BP, here are what the experts think of other stocks in the sector.
Shell
BP’s London-listed rival Shell has already pivoted from green energy to boost the more profitable parts of its business.
Chief executive Wael Sawan, who took the reins in 2023, has scaled back investments in renewable energy and focused on boosting profits and shareholder returns.
Sawan is aiming to close the valuation gap between Europe’s biggest oil firm and US competitors Chevron and Exxon Mobil.
The chief executive previously said he will consider moving the energy giant’s listing to the US if efforts to boost its valuation in the UK do not pay off.
Shell last month reported that profits fell 39pc to £2.97billion in the fourth quarter of last year compared to the previous three-month period. And annual earnings fell 16pc to £19.1billion in 2024.
But experts said investors should not be spooked by the drop in profits.
Morningstar analyst Good said: ‘Shell’s weaker-than-expected result may give investors a reason to pause, but they shouldn’t. The company flagged the weaker trading results earlier and those results are typically volatile.’
He added: ‘Shell has fared well since its strategic pivot back toward hydrocarbons and away from some of its prior low-carbon plans… We like this strategy and expect it to continue driving out performance, given its contrast to European peers.’
Sawan will set Shell’s strategy at a Capital Markets Day in New York on March 25.
Of the 22 City analysts following the company, 19 describe the shares as ‘buy’ including four who rate them a ‘strong buy’. The remaining three say ‘hold’ if you have them. None recommend investors sell.
TotalEnergies
French energy giant TotalEnergies, founded in 1924, is one of the world’s seven oil ‘supermajors’.
The company was formally known as Total but changed its name in 2021 to signal its ambition to be a ‘world-class player in the energy transition’.
However, chief executive Patrick Pouyanne recently announced that the company will reduce low-carbon investment by as much as £320million this year.
It added that its ambition to allocate 50pc of capital investment to renewable and low-carbon projects ‘is retired’. ‘We don’t see enough returns,’ Pouyanne said.
Maurizio Carulli, of Quilter Cheviot, said: ‘The company has an attractive long-term growth profile, backed by a strong pipeline of projects.’
And Morningstar analysts said: ‘Total has the cheapest integrated oil in our coverage. The relatively low valuation contrasts with the continued strong performance.’
Backing for TotalEnergies among analysts is strong – but not as strong as for Shell. Three rate the shares a ‘strong buy’ and 11 say ‘buy’ while ten say ‘hold’. Again, none say ‘sell’.
Equinor
Norwegian state-owned energy giant Equinor, formally known as Statoil, signalled its shift from fossil fuels when it ditched the word ‘oil’ from its name in 2018.
But it has recently slashed its green-energy goals to focus on oil and gas, cutting its renewable capacity target from 12 to 16 gigawatts by 2030 to between ten and 12 gigawatts.
And it scrapped a goal for 50pc of investment to be spent on renewables and low-carbon energy by the end of the decade.
The firm also hiked its oil and gas output forecast by 10pc. Under the plans, Equinor hopes to produce 2.2million barrels of oil a day in five years.
Equinor said it was focused on ‘strengthening value creation and ensuring competitive equity returns’ and was ‘adjusting ambitions to realities’ in relation to renewables.
Analysts at Morningstar said that ‘given its low valuation’, Equinor was among the European oil stocks that ‘should yield the most for investors through 2028’.
It certainly has its fans among industry experts, with six analysts rating it a ‘strong buy’ and 11 saying ‘buy’. Six say ‘hold’, four rate the stock as a ‘sell’ and two describe it as a ‘strong sell’.
ExxonMobil
US energy giant ExxonMobil was founded by John D. Rockefeller in 1870 as the Standard Oil Company.
The Houston-based firm has grown to become the biggest oil and gas company in the States and one of the largest in the world.
Unlike their European counterparts, American oil and gas companies have focused less on the energy transition – widening a valuation gap.
Oil analyst Paul Sankey said ExxonMobil and its US peer Chevron ‘have taken a much more measured approach, focusing on returns before investment’.
He noted they have ‘broadly eschewed’ moves into wind and solar, electric-vehicle charging and hydrogen.
Analysts are supportive, with six saying ‘strong buy’ and another ten saying ‘buy’. But there are doubters, with 11 giving it a steady ‘hold’ rating and one advising investors to ‘sell’.
Chevron
Chevron is the second-biggest oil and gas firm in the US and is battling a widening gap with its larger rival ExxonMobil.
The Houston-based company has announced plans to axe up to 20pc of workers – around 8,000 employees – by the end of next year as it seeks to cut costs and simplify its business.
It comes as its £42billion acquisition of oil producer Hess has been stalled in a legal battle with ExxonMobil.
But Morningstar’s Allen Good said that ‘while it may lack the growth options of Exxon’, Chevron’s ‘formula can also be successful’.
He added: ‘Management remains focused on maintaining capital discipline, reducing costs and returning cash to shareholders.’
Chevron is also backed by analysts, with five rating the stock a ‘strong buy’ and 13 saying ‘buy’. Another seven say ‘hold’ if you have it while none advise investors to sell.
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