Proactive Investors - What’s in store for BP PLC (LON:BP) now that it has confirmed its interim chief executive as the new permanent boss?
BP said on Wednesday that it has made interim CEO Murray Auchincloss its permanent chief executive.
This confirmed what many in the market had suspected, that it would make an internal hire and, in the absence of external competition, would likely maintain its interim boss, who had already been doing the job for four months already.
“After an extended job search for a new CEO, the bp Board has appointed what the market had long assumed to be the front-runner for position,” wrote Citi analyst Alastair R Syme.
Auchincloss, who has been BP's interim CEO since September, is expected to take the helm at the energy company permanently, in line with market speculation about who would replace ex-chief Bernard Looney.
On the face of it, most analysts expect the move will have a positive impact on the company’s share price.
Investment bank UBS indicated in a research note on Wednesday that Auchincloss’s appointment could provide some clarity, as the company’s strategy is expected to remain unchanged.
Auchincloss was instrumental in the formation of the current strategy under the previous management team.
Since becoming interim CEO on 13 September 2023, he has publicly reiterated his commitment to the oil company’s existing plan to transition from an international oil company (IOC) to an integrated energy company (IEC).
"Our strategy – from international oil company to integrated energy company, or IOC to IEC – does not change,” Auchincloss said.
“Now, more than ever, our focus must remain on delivery – operating safely and efficiently, executing with discipline, and always focusing on returns."
Before he became BP’s interim CEO, Auchincloss served as the company’s chief financial officer, becoming executive director of BP’s board on 1 July 2020.
He also held other senior roles across the company, in finance and management across tax, business development, mergers and acquisitions, and performance management.
From 2010 to 2013, he was the chief of staff to the BP CEO, joining the oil company after leaving Amoco, which BP acquired as part of a merger in 1998, and where he had worked since 1992. He remains a board member of Norwegian oil exploration company Aker BP.
His appointment was highlighted by some analysts as a catalyst that could improve the company’s share price over the year ahead.
“We expect a positive reaction to news that Murray Auchincloss has been confirmed as the new CEO of bp,” UBS analysts wrote.
“The news lifts an overhang on the shares with the strategy not changing given Mr Auchincloss was a key part of having set it under the old management team."
BP is the investment bank’s most preferred stock, and is analysts estimated a potential upside in its share price of 33%.
That sort of upside would be no small feat, as BP’s stock is trading more than 8% below where it was a year ago, at 445.45p per share.
But it is not without a caveat.
The bank reduced its share price expectations for the stock on Wednesday from a prior price target of 640 pence per share, to 600p per share.
UBS analysts said the oil company’s shares “currently offer no value for low-carbon activities”, though they indicated that electric vehicle charging and renewable natural gas are both potential growth areas for BP.
On Wednesday, analysts at Liberum welcomed the news of Auchincloss’s appointment, saying that the man is “well respected by the investment community” and places “great store” in hitting quarterly targets.
BP reported much higher profits of US$4.9 billion in the third quarter of 2023, compared to a US$2.2 billion quarterly loss a year earlier.
Liberum analyst David Hewitt said the language in Auchincloss’s statement suggests BP could reduce oil and gas production by up to a quarter, and that the renewables capital allocations announced last February will likely remain in place.
Hewitt also suggested that an internal candidate would minimise the possibility of another CEO exiting BP further down the line.
Citi analyst Syme meanwhile said the new CEO is expected to be at the helm until the 2030s, based on his age of 53 years, and maintained a 'positive catalyst watch' for the company.
While Auchincloss has reinforced BP’s strategy, it is also possible that it might undergo the same retrenchment of low carbon development as rival Shell PLC (LON:SHEL), which was downgraded by analysts this week for being slower to transition to low-carbon energy than rivals.
Yet holding back on low-carbon investment now, as analysts suggest, is likely to be costly for energy companies in the long run.