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Elliott Management is by pressing BP to increase its cash flow with an additional 40 percent addition through deep costs, as the activist investor increased its shares in the energy group to more than 5 percent and sharpens its criticism of the company.
The US -based defensive fund has told the BP that the “Basic Restoration” described by the chief executive of the oil and gas group Murray Auchincloss in February does not go so far and presented an alternative plan, according to people familiar with discussions.
Elliott is seeking BP to shift its focus from raising its oil and gas business in priority to a target of $ 20 billion in the annual cash flow by 2027, according to people familiar with discussions. This represents a 40 percent increase in the implicit target in February when the BP discovered its pivot away renewable and one more than double the “adjusted” cash flow of $ 8bn last year.
“Murray has taken 18 months to come up with a three-year plan that is neither ambitious nor urgent,” said one person known with Elliott’s opinion. “Time is not on the side of the PB here, with the macroeconomic environment and with the patience of the finishing investor. The constant subcontract of BP makes it open for a taking.”
BP announced on Tuesday that Elliott had increased its shares to just over 5 percent, worth about 2.8bn £, placing its shares at the same time with Vanguard, the company’s second largest investor. BP shares have fallen by about 18 percent since the new strategy was announced, reducing its market value to 57BN.
The defensive fund believes that the BP has a backward route in a higher rating if it may be more disciplined in its expenses, reducing capital costs to $ 12bN a year than in the $ 13 billion to $ 15 billion set by the company, people said. Elliott also thinks BP can do $ 5 billion in cost savings beyond its current target.
The activist also believes that the BP must sell its solar and offshore wind energy businesses, and that there is room to cut costs in its oil and gas business because its future oil sources are enough. “In the oil and business gas part, it is not about tracking growth, it has to do with discipline in investment,” the person known for Elliott’s opinion.
Elliott complained that management did not accept the roots of the company’s problems, which go beyond strategic stress away from renovations, people said.
“Management’s diagnosis was everything for vibes and atmosphere. Elliott’s diagnosis is that it has to do with how poorly executed in recent years, how they have left costs to be built. It is a story of execution,” said one person known with Elliott’s view. They added that there was reason to believe that there should be wider changes in Pb staff beyond the planned departure of Helge Luad, chairs.
One quarter of the BP shareholders voted against Lund’s re -election at the company’s annual meeting last week, reflecting the disappointment of investors in the subformation.
Examples of his poor capital discipline on the PB included excess expenses in his LNG Tortue project in Senegal and the high costs that partner Devon Energy quoted when he withdrew from a common argile oil company in the US, people said. They also said that excessive costs in the Biogasis Business in the US with $ 4 billion Pb were dangerous given the fuel dependence on federal tax loans and unsafe market prospects.
BP and Elliott refused to comment.
