BP shares climb on prospect Elliott stake will drive change

By Arunima Kumar and Samuel Indyk

LONDON (Reuters) - Shares in BP rose by 7% on Monday, and were on track for the biggest daily gain in two years, as investors anticipated that activist shareholder Elliott Management will press for board changes and strategy shifts to boost returns.

BP CEO Murray Auchincloss, appointed in January last year, has struggled to reverse the company's underperformance.

Expectations Elliott's acquisition of a stake will spur reform on Monday drove shares up by 7% to 463.70 pence by 1223 GMT. If the gains hold, the share will mark the biggest daily increase since February 2023.

Investors have questioned BP for lacking a clear strategy to grow its oil and gas business and deliver high returns to shareholders.

Its stock last year dropped by almost 16%. Among other energy majors, Shell fell nearly 4%, and ExxonMobil rose 8%.

With a market value of about 69 billion pounds ($85.57 billion), BP's valuation is less than half that of Shell.

The underperformance also made the British company a potential takeover target. Abu Dhabi National Oil Company (ADNOC) considered buying it last year.

"Given the circumstances around the changes to its previous CEO, we think any activist would call for a change in the Chairperson at the very least," RBC Capital Markets analyst Biraj Borkhataria said.

BP and Elliott have declined to comment.

RESTORING CONFIDENCE?

Auchincloss has been trying to restore investor confidence in the company's strategy, following the resignation of his predecessor Bernard Looney in September 2023 for failing to disclose relationships with employees.

"In terms of strategic business reviews, we would expect a push to effectively split up the core oil and gas segment to some of BP's transition growth engines, in order to help minimise capital into these areas," Borkhataria said.

BP, set to report its fourth-quarter earnings on Tuesday, last month warned of weaker results.

It also delayed its investor day to February 26 from February 11 because Auchincloss needed a medical procedure.

Auchincloss is expected to use the capital markets day (CMD) to announce his new strategy.

Since taking office, he has slowed investments in renewables and low-carbon energy and focused on higher-return oil and gas projects.

"Reports of Elliott taking an activist position in BP emerge at an interesting time with its CMD only two weeks out. Management was already under pressure into this event—this development, if true, adds to it," brokerage TD Cowen analysts said.

Elliott has become one of the most influential activist investors with about $70 billion in assets.

"Given Elliott's track record, we believe its involvement could lead to board changes (for BP), portfolio rationalisation, and capex prioritisation on upstream projects, aiming to maximise free cash flow generation," Jefferies analyst Giacomo Romeo said.

A source familiar with the matter told Reuters on Saturday Elliott had built a stake without disclosing its size.

Bloomberg News earlier reported U.S.-based Elliott was seeking to boost shareholder value by urging BP to consider transformative measures and called Elliott's stake in the company "significant".

($1 = 0.8064 pounds)

(Reporting by Samuel Indyk and Arunima Kumar; Editing by Amanda Cooper and Barbara Lewis)