BP Picks Murray Auchincloss as CEO, Pledges Faster, Simpler Oil

BP named Murray Auchincloss as its permanent chief executive on Wednesday, ending a four-month search after Bernard Looney resigned over undisclosed personal relationships with colleagues. Auchincloss, who had been acting CEO since September, inherits a company that he said has become "too slow" and "too complex" under Looney's net-zero push.

The new CEO's first public message to staff was blunt. "We need to get after it," he wrote in a note seen by Reuters. "We have to simplify the organization and focus on value."

BP shares rose 1.2% in London trading after the announcement. The stock has lagged rivals Shell and TotalEnergies over the past two years as investors questioned whether Looney's aggressive energy-transition strategy could deliver returns comparable to pure-play oil companies.

Auchincloss, 52, is a BP lifer who joined the company in 1998 and rose through the finance ranks. He served as CFO from 2020 until taking the interim CEO role. Analysts said his appointment signals continuity on the operational side but a potential pivot on strategy.

"Murray is a safe pair of hands who knows the balance sheet inside out," said RBC analyst Biraj Borkhataria. "But the question is whether he will maintain Looney's ambition to cut oil output 40% by 2030 or adjust it to meet shareholder demands for higher returns."

BP's current strategy, laid out in February 2023, targets 2 million barrels of oil equivalent per day by 2030, down from 2.3 million in 2019. The plan also calls for a 50% increase in renewable energy capacity and a rapid build-out of electric-vehicle charging points.

The transition has been expensive. BP spent roughly $8 billion on low-carbon acquisitions and development between 2020 and 2023, including the $4 billion purchase of Archaea Energy, a U.S. biogas producer. Returns from those investments have been slower to materialize than oil and gas earnings, which hit a record $27.7 billion in 2022.

Looney's departure in September came after BP's board learned he had failed to fully disclose past relationships with colleagues. The company said at the time that it found no evidence of misconduct related to BP's operations, but the scandal damaged his credibility with staff and investors.

Auchincloss now has to decide whether to stick with Looney's timeline or slow the transition pace. The company's next investor day is scheduled for February 2024, and the new CEO said he would use that event to outline any changes.

"We have a sound strategy," Auchincloss told analysts on a conference call Wednesday. "But we need to execute it better. That means fewer layers, faster decisions, and more accountability."

Some investors are pushing for a sharper course correction. Bluebell Capital Partners, an activist hedge fund with a small BP stake, wrote to the board in October urging the company to abandon renewable energy targets and focus on maximizing oil and gas cash flows. BP publicly rejected the letter, saying its strategy was "the right one for the long term."

Auchincloss sidestepped the Bluebell question during the call, saying only that BP would "listen to all shareholders" and "make our own judgments about where value is created."

The CEO's first concrete move may come soon. BP is expected to announce a new share buyback program alongside its fourth-quarter results in February. The company has already repurchased $8 billion of shares since 2022 and has committed to returning 60% of surplus cash flow to shareholders.

"Buybacks are the easiest lever to pull for a new CEO who wants to win over the market quickly," said Bernstein analyst Oswald Clint. "The harder question is whether Auchincloss will also trim the renewable energy budget."

The new CEO has one structural advantage: BP's balance sheet is stronger than it was when Looney launched the transition push. Net debt fell to $22 billion by the end of the third quarter, down from $39 billion in mid-2020. That gives Auchincloss room to increase returns to shareholders without selling assets or cutting the dividend.

BP maintained its dividend at 6.61 cents per share in the third quarter, and analysts expect a small increase in the first half of 2024.

What remains unclear is how Auchincloss will handle the legacy oil and gas portfolio. BP has sold $25 billion of assets since the 2020 Deepwater Horizon settlement, including its entire stake in the Prudhoe Bay field in Alaska. The remaining production base is concentrated in the Gulf of Mexico, the North Sea, and the Gulf of Oman.

"The easy divestments are done," said Borkhataria. "If Auchincloss wants to keep cutting oil output, he will have to let natural decline do the work. If he wants to grow, he will need to buy."

Auchincloss declined to discuss M&A on the call, saying only that BP's portfolio was "well-positioned" and that any changes would be announced at the investor day.

For now, the market is giving him the benefit of the doubt. BP trades at 5.5 times forward earnings, a discount to Shell's 7.2 times and TotalEnergies' 6.8 times. A clear strategic direction from Auchincloss could narrow that gap, analysts said.

"The Looney era was about vision," said Clint. "The Auchincloss era will be about delivery. That is what the stock needs."