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Ouch, what a sh$t show. They really need to stay within their core competences, ie dirty to green liquids and gases. If you are head of renewables, obviously you want to go for everything including solar and wind. No, no, no!
I am all for it and hold several green cos, including JLEN and UKW. Just not something for BP.
I thought the vast majority of solar was via Lightsource BP,which BP owns 50% of.
Their model is mainly to finance via debt against future earnings or to sell all or part of a fully developed project to fund future development.
Thus BP does not use its CapEx to fund their developments,or have I got it wrong.
If there is no merger between Shell and BP (which, if it happened, I would support as a shareholder in both), the two should, at least, merge their renewables assets into a separate legal entity (e.g. a joint venture company). They can retain 30% each and raise equity against the remaining 40% in an IPO listing publicly. IPO proceeds can be reinvested in the new business.
The advantage is that the new company would need to explicitly and transparently justify its decisions based on sound commercial logic, rather than because it needs to pander to the green lobby.
Shell and BP should focus only on oil and gas.
All IMHO DYOR
Happy
Happy
I read an article today which suggested that Exxon, was committed to staying an oil and gas company ( which we know).
But considered that if in the future the time was right to follow BP and Shell.
Then Exxon had just proven it had very deep pockets, and could then spend $60 bn on a renewable company to give it the energy exposure to renewables.
For Exxon that may actually make sense.
Food for thought
Meororyou
As always, you raise a good point.
However, I don't think there will ever be any such thing as a "renewables" company or a true Integrated Energy Company (IEC), as Looney liked to repeat often. One could argue that the likes of Total are the closest thing today to an IEC, but the problem is that there's little crossover between different renewables technologies. The technologies and skills for solar are very different to wind, and hydrogen is different yet again. Some technologies are mature (if not widely adopted) while others are in their infancy and unproven commercially. What future is BP actually betting on when its renewables investments are so widely, and i would argue thinly, spread?
Looney often used to say large corporate customers are looking to BP to help meet their Net Zero needs by delivering balanced energy from different sources i.e. an increasing component from renewables. But I can't imagine a day when the production of energy is seamlessly integrated with the delivery of energy (e.g. the grid). It is for the grid operators to make decisions about where, when and how they source the energy needed to balance the demand of end-users. There will always be a very important part for oil and gas in a mixed energy system.
Interestingly, Exxon is playing this conundrum by moving into areas such as lithium mining, where it believes commercial returns are more visible than producing renewable energy. Mining also requires a lot of energy so there is a degree of complementarity to its existing oil and gas business. Being an oil and gas producer could give it a potential cost advantage versus traditional mining companies.
Ultimately, I think BP is on the cusp of a more fundamental pivot back to oil and gas. I think for the second time in its history, Beyond Petroleum will be quietly shelved by a new CEO and drill, baby drill will be the new jukebox hit. What would really put the cat amongst the pigeons is a Republican victory in the US Presidential elections in November 2024. This would probably kill off Net Zero for good.
These are interesting times and I hope we get a US CEO from Houston to navigate us to a better place.
All IMHO DYOR
Happy
Interesting comment Happy.
The potential for an IEC is 100% there and live - its a hedging strategy to have a diverse power/ energy portfolio as the world weens itself off O&G.
The limited cross-over of renewable technologies isn't a big deal - bp have proved through lightsource they can enter areas of little competency and stand-up a sustainable business - the value, as in O&G is the integrated value chain. What differs in renewables is the production, the rest of the value chain is largely the same, i.e. the renewables power can still be traded, can still be transported to customers or retail sites and sold alongside other areas of the downstream portfolio.
I don't forsee a pivot coming, the IEC strategy is too ingrained in the company, from the board to exec team to what we publish externally to the major shareholders. Imagine the questions if the board and c-suite pivoted now, just three years after they signed such a sector divergent strategy. They may as well resign themselves if they do so.
A bet on bp is a bet that a diverse energy portfolio will come good as governments legislate against carbon, we've seen it in auto and it won't be long until we see it in energy also.
I see the Motley Fool has suddenly changed his stance on BP, after knocking them for an eternity
Must be a sign of things to come
WeirdPal
Thanks for the alternative and equally valid view.
You have an employee's perspective, which gives you a different and better insight into strategy and culture. It's very interesting that you stress how corporately ingrained the new strategy is.
"Imagine the questions if the board and c-suite pivoted now, just three years after they signed such a sector divergent strategy. They may as well resign themselves if they do so."
This paragraph made me smile. Personal view only but I would happily replace the entire board in a heartbeat. They should have gone with Looney tbh after all they appointed him to the top job despite having apparent knowledge of his past shenanigans. An error of judgement coupled with (what I believe) is a poor strategic direction for the company.
Thanks for the reply. Certainly food for thought. In any case, I'm not selling at this price. It's way too cheap based on hard financials.
All IMHO DYOR
Happy
The potential for an IEC is 100% there and live - its a hedging strategy to have a diverse power/ energy portfolio as the world weens itself off O&G.
The limited cross-over of renewable technologies isn't a big deal - bp have proved through lightsource they can enter areas of little competency and stand-up a sustainable business - the value, as in O&G is the integrated value chain. What differs in renewables is the production, the rest of the value chain is largely the same, i.e. the renewables power can still be traded, can still be transported to customers or retail sites and sold alongside other areas of the downstream portfolio.
I don't forsee a pivot coming, the IEC strategy is too ingrained in the company, from the board to exec team to what we publish externally to the major shareholders. Imagine the questions if the board and c-suite pivoted now, just three years after they signed such a sector divergent strategy. They may as well resign themselves if they do so.
A bet on bp is a bet that a diverse energy portfolio will come good as governments legislate against carbon, we've seen it in auto and it won't be long until we see it in energy also.
You’ve just copied my comment from a few days ago
Spondulicks: "They may as well resign themselves if they do so." - Yes, please!!
I am not against renewable efforts, especially within liquid and gaseous forms, though. BP should not become an extended arm of politicians, gobvernments etc. at the shareholders' expense, then they should simply nationalise and see if they can do better. It just needs a bit of a reset and the CEO situation is clearly totally unacceptable. If not, then I will look for the next high and move my cash into Shell. Just fits me better if no change here.