BP to provide an update on cost-reduction efforts in response to escalating pressures from Elliot, according to reports in the Financial Times
BP Under Pressure to Deepen Cost-Cutting Measures
In a move to boost shareholder value, activist investor Elliott Management is urging British oil and gas giant BP to significantly increase its cost-cutting efforts. Elliott, which holds a stake of more than 5% in BP, is pushing for the company to nearly double its originally announced cost savings target and reduce annual spending.
According to reports from The Financial Times, Elliott Management wants BP CEO Murray Auchincloss to add an additional $5 billion of cost savings to the previously announced reductions by 2027. This would bring the total savings to between $9 billion and $10 billion from a 2023 baseline.
BP has already made strides in cutting costs, having already trimmed $750 million off its expenses towards its 2024 target. The company is expected to announce updates on its $5 billion cost-cutting initiative on Tuesday. However, it remains unclear whether the previously announced initiative has been updated since the initial announcement.
To achieve these ambitious cost savings, BP is planning to intensify its cuts, restructure, divest assets, and focus on fossil fuel investments. The company aims to reach its target through job cuts, asset divestments, and supply chain streamlining.
Elliott Management has identified tens of thousands of BP support staff globally as an example of the cost base that could be reduced. The investor also wants BP to deepen its cost cuts, especially on administrative expenses. Additionally, Elliott is pushing for BP to create separate units for upstream and downstream activities to improve accountability.
The pressure from Elliott Management comes as BP faces criticism for its high operational expenses, which remain high relative to EBITDA compared to peer companies like Shell. The company is under pressure to improve operational efficiency, as evidenced by upstream and downstream plant reliability gains.
However, BP's refocus on oil amid cost-cutting has raised ESG concerns and debate over balancing short-term financial improvements against long-term energy transition challenges. Shareholders have shown some support for Elliott’s activist agenda by rejecting the current chairman’s reappointment, signaling endorsement of leadership changes to hasten strategy execution.
Reuters could not immediately verify the report, and both BP and Elliott Management did not immediately respond to a request for comment. The updates come as part of this activist-driven transformation, with progress and further updates expected in the coming months.
- BP, under pressure to deepen cost-cutting measures, is now considering the potential reduction of tens of thousands of support staff globally, as suggested by Elliott Management.
- In a bid to further improve operational efficiency and appease Elliott Management, BP is also contemplating focusing more on administrative expense reductions within the industry and finance sectors.
