Bluebell Capital Urges BP to Rethink Clean Energy Shift Amid Share Price Concerns

In a bold challenge to BP‘s current clean energy strategy, London-based hedge fund Bluebell Capital Partners has called on the energy giant to abandon plans for a significant reduction in oil and gas output. Bluebell argues that BP’s strategy has not only led to a depressed share price but also lacks realism in anticipating a drastic decline in oil and gas demand, terming it “utterly unrealistic.” The hedge fund, which acquired a small stake in BP and sent a letter to the company in October, contends that BP could be worth 50% more than its current share price implies.

BP had been undergoing substantial changes under former CEO Bernard Looney, who aimed to reduce oil output by 25% compared to 2019 levels by the end of the decade. However, Bluebell claims that the strategy has not only hurt BP’s share price but also lacks realism in anticipating a sharp decline in oil and gas demand. Despite Looney’s departure in September due to undisclosed relationships with colleagues, BP’s leadership, including Chairman Helge Lund and CEO Murray Auchincloss, continues to support the existing strategy.

Bluebell, known for its influential campaigns against companies like Danone and Glencore, asserts that it is not against clean energy but suggests that BP should avoid ventures where it lacks a competitive edge, such as solar and offshore wind. The hedge fund’s co-founders, Giuseppe Bivona and Marco Taricco, express environmental concerns but emphasize the importance of strategic investments with higher returns. Bluebell, managing about $150 million across various companies, lacks the financial strength to enforce its stance through a shareholder vote.

In a 30-page letter, Bluebell argues for BP to increase production in the coming years and commit to emissions reduction “in line with society.” The hedge fund questions BP’s valuation, suggesting it is undervalued in the market. BP’s shares traded at 466p on Monday, valuing the company at £79 billion.

While Bluebell’s calls for a change in strategy are likely to face opposition from BP’s leadership, environmentalists are also critical of the company’s efforts, arguing that it has not done enough to address emissions. The International Energy Agency has previously stated that no new oil and gas fields should be developed to limit temperature increases.

Mark van Baal, head of Dutch activist group Follow This, has forced shareholder votes at several major energy companies, demanding stronger emissions reduction targets. He questions whether Bluebell will gain significant shareholder support and argues that BP’s underperformance versus peers is linked to its decision to cut dividends in 2020.

A BP spokesperson stated that the company welcomes constructive engagement with shareholders and has received support for its strategy from major shareholders in recent meetings. BP remains committed to its strategy, emphasizing progress, and expressing confidence that it will deliver sustainable long-term value for shareholders.

Bluebell’s challenge underscores the ongoing tension between traditional energy companies and investors advocating for a more rapid transition to cleaner energy sources. As the world grapples with environmental concerns and the imperative for sustainable practices, such clashes are likely to become more frequent, shaping the future trajectory of major players in the energy sector.

The current energy landscape is witnessing a paradigm shift, with companies globally recalibrating their strategies to align with climate goals and investor expectations. BP, a stalwart in the oil and gas sector, has been at the forefront of this transformation, with former CEO Bernard Looney spearheading efforts to pivot towards cleaner energy sources. However, this shift is not without its challenges, as evidenced by the recent pushback from hedge fund Bluebell Capital Partners.

Bluebell’s critique revolves around the perceived negative impact of BP’s clean energy strategy on its share price. The hedge fund argues that the strategy is based on an unrealistic assumption of a drastic decline in oil and gas demand. While Bluebell acknowledges the importance of embracing clean energy, it advises BP to focus on ventures where it has a competitive edge and can generate higher returns.

This clash of perspectives brings to the forefront a broader debate within the investment community about the pace and nature of the transition to clean energy. It highlights the challenges companies face in balancing shareholder expectations, societal demands for sustainability, and the economic realities of the energy market.

BP, under Looney’s leadership, had set an ambitious target to reduce oil output by 25% compared to 2019 levels by the end of the decade. The company also ventured into renewable energy sources such as solar, wind, and biofuels. These initiatives were aimed at positioning BP as a leader in the evolving energy landscape and preparing for a future with diminished reliance on traditional fossil fuels.

However, Bluebell’s intervention suggests a divergence in views regarding the feasibility and financial impact of such a strategy. The hedge fund’s call for BP to increase production in the short term and commit to emissions reduction “in line with society” reflects concerns about the company’s valuation and its ability to deliver value to shareholders.

The ongoing debate over BP’s strategy reflects broader shifts in the energy sector. Investors are increasingly scrutinizing companies’ environmental, social, and governance (ESG) practices, and expectations for meaningful action on climate change are rising. The International Energy Agency’s recommendation to refrain from drilling new oil and gas fields aligns with the growing consensus that a rapid transition to cleaner energy sources is essential to mitigate the impacts of climate change.