BP plc (LON: BP) is in focus this morning after activist investor Elliott Management revealed a stake in the energy giant that has lagged its peers in recent years.
Elliott did not disclose the size of its stake in BP today – neither did it particularly hint at what it intends to push for the oil and gas behemoth.
Given the activist investor’s track record, however, it’s reasonable to believe that it could push for significant strategic changes both in management as well as the operations of the company.
BP stock is currently down nearly 15% versus its 52-week high.
Elliott could push for a new chairperson at BP
RBC analysts expect Elliott Management to push for a new chairperson at BP to steer the company in a new direction.
Helge Lund – the current chairperson has been committed to investing in renewable energy and lowering the firm’s oil and gas output.
However, his strategic direction has been criticized for not generating sufficient shareholder value and leaving the company highly leveraged.
Elliott could, therefore push for a new chairperson to steer BP back towards its core oil and gas operations, which they see as a more profitable and stable path forward for the London headquartered firm.
Note that BP stock currently pays a rather lucrative 5.14% dividend yield.
Elliott may want BP to focus on its core operations
Additionally, analysts expect Elliott Management to urge BP to consider separating its traditional oil and gas operations from its renewable energy ventures to minimize capital investments into the latter.
We would expect a push to effectively split up the core oil and gas segment to some of BP’s transition growth engines, in order to help minimise capital into these areas.
The Elliott news arrives only a day before BP is scheduled to report its fourth-quarter results. The energy giant is slated to reveal its broader strategy as well on February 26th.
Ahead of its earnings release, BP stock is up more than 25% versus its low in late November.
Elliott may urge BP to cut costs further
Finally, the activist investor could push for further cost reductions, including layoffs at BP.
In January, the oil and gas behemoth said it was interested in unloading its Ruhr Oel GmbH refinery assets and planned on lowering its global headcount by 4,700 as part of its new CEO’s attempt to deliver cash savings worth at least $2.0 billion by the end of 2026.
BP is expected to earn 56 cents a share in its Q4 on $57.7 billion in revenue.
This suggests a close to 10% annualized increase in the top-line but an alarming 48% year-on-year hit to the company’s bottom line.
Wall Street currently has a consensus “overweight” rating on BP stock.
Analysts see an upside in it to about $36 on average which indicates potential for a more than 10% gain from current levels.
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