13th Sep 2023 12:35
(Alliance News) - The surprise resignation of BP PLC Chief Executive Bernard Looney late Tuesday, after he admitted that he had not been "fully transparent" about historical relationships with colleagues, drew a relatively subdued market reaction in London on Wednesday.
The stock was down 1.2% at 516.80 pence shortly after midday in London, comfortably off the bottom of the FTSE 100, which itself was down 0.5%.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said higher oil prices on Wednesday might be limiting some of the fallout from this "highly unwelcome" turn of events.
A barrel of Brent oil was quoted at USD92.59, up from USD92.26 at the London equities close on Tuesday. The North Sea oil benchmark is up 7.0% over the past month.
"Change at the top is always unsettling and the abrupt nature of his departure will intensify reactions, particularly as it comes at such a sensitive time in the company's strategy," Streeter said.
BP on Tuesday said Looney had resigned "with immediate effect" after less than four years in the role, saying finance chief Murray Auchincloss would be interim CEO.
The oil major explained that in May last year its board received and reviewed allegations from an anonymous source relating to Looney's conduct "in respect of personal relationships with company colleagues".
During that review, Looney had disclosed "a small number of historical relationships with colleagues prior to becoming CEO" but noted that no breach of the company's code of conduct was found.
"Further allegations of a similar nature were received recently, and the company immediately began investigating with the support of external legal counsel," it said, adding that the process was continuing.
BP explained that on Tuesday Looney informed the company he was "not fully transparent in his previous disclosures".
"He did not provide details of all relationships and accepts he was obligated to make more complete disclosure," BP said.
Russ Mould, investment director at AJ Bell, said that assuming this is "largely the end of the matter" and that CFO Auchincloss can lead the company through the transition to a new leader, then "little harm may be done" to BP.
However, Mould cautioned that the "nagging worry" is that this is simply the tip of an iceberg and reflect of wider problems within BP's workplace culture.
"Given this uncertainty, it may be a few weeks before shareholders are sitting comfortably again," he said.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said a "clear path forward" needs to be forged "sooner rather than later" to limit any further negative sentiment, adding that the shock resignation also lands at a time oil majors are "already grappling to boost their [environmental, social, and corporate governance] credentials".
In recent months, Looney had vowed to reposition BP as a leader in clean energy technologies, and gradually cut oil and gas production to reduce carbon emissions.
Back in February, BP announced USD8 billion worth of investment into "transition growth engines" before the end of the decade. It said its growth strategies responded to what it called the "energy trilemma": maintaining energy security, particularly in the wake of hydrocarbon price and supply volatility caused by the Russian invasion of Ukraine; maintaining energy affordability; and addressing decarbonisation concerns within the industry.
Looney argued at the time that BP's dual approach in increasing spending for lower carbon energy and hydrocarbons was necessary to both address decarbonisation concerns among investors and within the industry, while "keeping energy flowing" amid concerns of price and supply globally through continued hydrocarbon investment and growth.
However, BP has come under repeated fire from environmentalists who have criticised it for inaction amid rising temperatures and extreme weather events globally.
Hargreaves Lansdown's Streeter said Looney's successor is "likely" to continue with the argument that investment in oil and gas will help "smooth out pricing" and "ease an energy transition rather than risking volatility through sharper reductions".
"But this won't go down well with responsible investors, and also poses a risk to BP's longer-term valuation if mainstream investors can't be convinced of its ESG credentials," she warned.
By Heather Rydings, Alliance News senior economics reporter
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