Last month, BP plc, the smallest of the big five oil majors, surprised with the sudden exit of Bernard Looney, its CEO since 2020. We do not know the details other than BP’s announcement that its boss had not been “fully transparent about historical relationships with colleagues”. The BP man, working for the company since 1991 when he was a 21-year-old graduate, had been grilled about his social life before, when he was about to be nominated for the top job, but had to step back when more affairs were anonymously reported than he had admitted at the time.
I do not know what was revealed about Looney’s amorous lifestyle, but I find it remarkable that an industrial leader with exceptional qualifications stumbles over a workplace affair.
This is both good and bad. It is good that women are not considered fair game anymore, not having to work in an atmosphere of permanent fear of transgressions from their superiors and male colleagues. Misogynist behaviour can only be pushed back with rules that are strictly enforced. Standards are gradually shifting in the right direction.
It is bad when consensual relationships are used for blackmail or office intrigue. The rule of thumb nowadays should be to never have an office affair. This makes life quite difficult, particularly for people outside a firm relationship and in demanding positions where 80-hour working weeks are not uncommon.
Looney was not BP’s first CEO to resign over sexual allegations. Lord John Browne, CEO from 1995 to 2007, an erudite, highly cultured person with a knack for shrewd and highly profitable business deals, decided to step back when UK tabloids threatened to go public with his homosexuality.
BP’s business in Russia was just going through a very lucrative phase, having partnered with the powerful and ruthless oligarchs Friedman, Aven, Khan, Vekselberg and the Russian emigré investor Lev Plavatnik to form the joint venture TNK-BP. His homosexuality would not have gone down well with the Russian macho crowd, which would later play hardball with Browne’s successor Bob Dudley, a feeble American they would soon cut loose.
Despite his modest qualifications (Dudley was the ridiculously unsuccessful Moscow representative of Amoco when the US oil company was bought by BP in 1998) he would lead BP for more than a decade (2010-2020) busying himself with the clean-up of the Deepwater Horizon disaster, the largest marine oil spill in history.
On April 2010, the offshore drilling platform Deepwater Horizon, owned by Transocean and operated by BP, exploded in a gas blowout that killed a crew of 11, and over the next days and weeks kept spilling 4.9 million barrels of oil.
The clean-up costs, the compensation for victims and business losses and legal fines cost BP $70 billion so far, and counting. And the CEO Tony Hayward his top job – hence Dudley.
Despite his keen sense for a deal, Lord Browne had to experience earlier disasters on his own watch. When acquiring the US oil companies Arco and Amoco, the acquisitions came with a lot of antiquated infrastructure and outmoded plants.
In 2005, the Texas City Refinery blew up, killing 15 and injuring 180. In 2006, the Prudhoe Bay oil spill from a leaking Alaskan pipeline made headlines. Over the years, BP became the poster child for Bad Boy Oil. BP’s very profitable 20 per cent investment in Rosneft – a legacy of the forced exit from TNK-BP – does not wildly improve BP’s ethical credentials. BP has written down the investment, but still books its reserves.
In 2001, Lord Browne prescribed BP a makeover. The company logo, essentially unaltered since its days as the Anglo Persian Oil Company at the beginning of the 20th century, had to go. It was replaced by the happy-green, sunburst logo and came with the new slogan “Beyond Petroleum”. This was programmatic, if somewhat disingenuous.
Looney started to weed out less lucrative fossil prospects and to invest billions in renewable power- Andreas Weitzer
BP admittedly took some early steps into green fuels and solar, but the lion share of its investments still went into upstream gas and oil prospects. To me, having lost a dear childhood brand, it looked like unabashed green-washing.
Duly, Dudley waved goodbye to solar power in 2011, and in 2018 to BP’s wind generation assets. BP was again Big Oil only. Its foray “beyond” fossil fuels was over.
When the North Sea driller Bernard Looney (then 53) got behind his CEO desk, the company started to question its raison d’etre within rapidly deteriorating climatic conditions. An oil company could either continue drilling for oil and gas until its time was up, like tobacco companies do in a very successful manner, or it could position itself as a renewable energy provider.
Looney promised to reduce oil and gas output within this decade and to achieve net zero emissions by 2050. He started to weed out less lucrative fossil prospects and to invest billions in renewable power.
For an investor it is not obvious what path would be the more lucrative: to milk dirty assets with high returns like a high yielding bond until expiry, or to re-profile a company for what is essentially a new business: renewable energy generation, carbon capture, research and development for alternative energy solutions, building EV charging infrastructure, investing in battery making, or a more powerful grid, for instance.
It is hard to tell if other companies wouldn’t qualify better. But what is clear is that very few companies have the cash flow of oil majors, which earned $200 billion in 2022 alone. They do not need enthusiastic ESG investors for cash.
Now, BP is not the darling of the oil investing crowd. Of all the big oil companies it has the lowest price-earnings-fraction: 6.25. Its share price, in other words, is worth not more than 6.25 years of income. This does not compare well with its American peers Exxon Mobil (9.25) and Chevron (10.17), which are more expensive.
A possible explanation is that US stock markets have generally higher prices than Europe. Another possible explanation is that investors who see the cash bonanza reaped by more purist, climate-ignoring drillers, are worried that BP is a bad return on their investment. Green initiatives cost a lot of money with often modest outcomes, when compared with an energy market where the oil price is now going through the roof thanks to Saudi and Russian collaboration on reducing export quotas.
That said, despite being a laggard, BP stock has gained 30.5 per cent over the last year, more than its US peers. Only TotalEnergies of France could beat that, and they too are trying to position themselves “beyond petroleum”.
It remains to be seen who will take over from interim-CEO Auchinloss, BP’s CFO. I’d prefer someone who is not steering back in the old drilling direction while at the same time not relinquishing climate responsibility to state actors like Aramco or Rosneft, or private drillers who don’t give a hoot about CO2 emissions. ESG means partnering with Big Oil, not closing one’s eyes to the fact that we all still depend on fossils for now.
Andreas Weitzer is an independent journalist based in Malta.
The purpose of this column is to broaden readers’ general financial knowledge and it should not be interpreted as presenting investment advice, or advice on the buying and selling of financial products.