Elliott builds £4bn stake in BP and seeks huge asset gross sales | USAEMALL.com

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Activist hedge fund Elliott Management has become BP’s third-largest shareholder after building a near-5 per cent stake worth almost £3.8bn, as it seeks to force the troubled UK oil major to cut spending on renewables and make big divestments, according to two people close to the situation.  

The position is one of the US fund’s largest and could include shares as well as derivative positions that replicate an economic interest in the stock, a tool that Elliott has used in past campaigns.

Only BlackRock and Vanguard hold larger stakes in the FTSE 100 energy major, at 9 per cent and 5 per cent respectively.

Since 2020, BP has raised its spending on energy transition businesses from about 3 per cent of its capital expenditure to 30 per cent, or roughly $5bn a year, building a portfolio including wind, solar, biofuels and hydrogen. 

This was a poor use of capital and BP should limit its future spending on renewables and sell off a wide swath of assets, said a person familiar with Elliott’s thinking.

BP had a difficult 2024, with its shares falling roughly 30 per cent between April and December because of its poor financial and operational performance, as well as a perceived lack of strategic clarity from chief executive Murray Auchincloss. 

But the shares have risen 16 per cent this year, as the market speculates that the company’s valuation would entice an activist investor or even a takeover bid. 

News of Elliott’s involvement broke on Saturday, and Auchincloss promised a “fundamental reset” of BP’s strategy as he released another set of disappointing results on Tuesday. BP is due to unveil its plans at a capital markets day on February 26.

It is not yet clear whether those plans will be sufficient to satisfy the hedge fund. Elliott hopes to see an aggressive chair supported by an engaged board pushing for the reset, according to the people familiar with the matter. 

Elliott’s campaign is being run by John Pike, who specialises in energy and industrial investing, and Gaurav Toshniwal, an energy-focused portfolio manager in London. 

Pike has run several previous campaigns in US oil companies Hess and Marathon, the Canadian oil sands producer Suncor and the refiner Phillips 66.

Elliott revealed earlier this week it had increased its stake in Phillips 66 and called for the company to start selling off its pipeline and chemicals assets. Pike is also responsible for Elliott’s position in Anglo-American, the FTSE 100 UK mining group.

The person familiar with Elliott’s thinking said the hedge fund was prepared to be a long-term holder of BP’s shares, noting that the campaigns in Hess and Marathon had run for between six and eight years.