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Poaching a new chief from an underperforming rival is not an obvious way to excite investors. But that’s the situation at BP, the UK oil major that is under pressure from Elliott Investment Management. The company chaired by Albert Manifold has selected Woodside’s Meg O’Neill to replace boss Murray Auchincloss.
On the face of it, this doesn’t look like a knockout hire. Woodside’s stock is basically flat since O’Neill’s appointment in August 2021. Even ailing BP is up about 40 per cent over the same period.
To be fair to O’Neill, that’s partly to do with Woodside’s business mix: as a dedicated oil and gas producer, it is more exposed to falling commodity prices than integrated companies like BP, which also have big refining and trading businesses. But O’Neill’s big bet on US liquefied natural gas — which involved acquiring Tellurian in 2024 — is also weighing on the shares, given the glut of gas that is being readied for export from America.
Yet, given BP’s circumstances, even a sub-optimal change is better than the status quo. BP’s ills stem largely from its flip-flopping green strategy. O’Neill — a former Exxon executive — won’t have that problem. She is an oil and gas specialist and, as research analysts at Australian stockbroker Morgans point out, has a good record of delivering major projects on time and on budget. BP sure could use some of that skill and focus — especially since its recent exploration success actually gives it some resources to develop.
The second and most important reason why this is good news for BP is simply that O’Neill isn’t Auchincloss. The outgoing boss was finance director under Bernard Looney, the architect of the now-abandoned green pivot. He had made a valiant effort to start cutting costs, sell businesses and improve underlying production volumes, but it is easier for a newcomer to assess its failures dispassionately and make more radical changes.
There is certainly room to do so. Take costs, for example. Auchincloss had identified structural cuts of $4bn-$5bn by the end of 2027. But costs are still rising in other parts of the business. Indeed, at its first-half results, its $900mn of delivered cuts were almost entirely offset by new expenses. Elliott has already called for a higher target.
Similarly, BP has launched a $20bn disposal programme, which includes its US lubricants business Castrol. But its global network of fuel stations remains largely untouched. Exiting the markets where it is not a major participant — everywhere except the US, UK, Australia and Spain — could fetch almost $15bn, Goldman Sachs estimates. As the first outsider to run BP, O’Neill may have less attachment to the downstream business.
O’Neill may have a mixed record when it comes to picking what a company should invest in. But what BP needs is a clean-up, not a whole new vision. A new broom should make the job easier.
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