BP’s greener vision has failed to excite shareholders

BP’s greener vision has failed to excite shareholders

Here’s a sight that hasn’t been seen since 1994: shares in BP priced at less than 200p. The stock, 480p at the start of this year before the Covid recession hammered the oil price, closed on Wednesday at 199.96p.

Even as recently as August, a sub-£2 moment seemed unlikely. That was when the new-ish chief executive, Bernard Looney, pitched to investors his plan to make BP a net zero carbon company by 2050. The rejig seemed to go down well. Despite the inevitable cut in the dividend, BP’s shares were briefly steady at 300p. There was talk about the company acting just in time to save itself from oblivion.

Investments in low-carbon assets, mainly offshore wind and solar, will rise tenfold to $5bn (£3.8bn) a year by 2030 under Looney’s plan. Output from fossil fuels is expected to fall 40% from 2019 levels. And BP will get bigger in convenience stores attached to filling stations and “mobility”, meaning charging points for electric vehicles.

So why has the company’s value fallen by a third since unveiling its vision? One reason – a source of relative comfort for Looney – is that all oil companies, even those without ambitions to achieve zero carbon by 2050, have continued to be clobbered as the oil price has failed to recover. ExxonMobil, which has barely budged on climate policies, has shed an astonishing $150bn of stock market value this year. BP’s share price is not an outlier.

But nor can one say that Looney’s greener vision has excited BP’s shareholders. That worry should also concern outsiders: the company’s wind and solar investments are more likely to happen at speed if they are judged to deliver safer, more stable financial returns, which is how Looney sold his reinvention plan.

He will know the scepticism is specific: since BP is a late-comer to the renewables market (after a false start in the late-1990s), why is it confident it can achieve internal rates of return of 8%-10% from wind and solar? Don’t established specialists in renewables just know the territory better than a recanting oil giant?

Back in August, Looney argued that BP understood the energy landscape and its trading arm was skilled in writing the long-term contracts that underpin large renewables projects. Well, maybe, but the stock market clearly wants to hear more than a loose assertion of confidence.

BP will announce its third-quarter numbers next Tuesday, which is an ideal opportunity for Looney to add some credibility, if he can, to the idea that a late-arriving oil company can also be top-of-the-class in renewables. He probably didn’t think BP’s investors would need a pep talk so soon, but it seems they do.

William Hill knows that everyone hates a happy bookie
Bookmakers always grumble about something – it’s a form of advertising. Complaints over the years include too many favourites winning at the Cheltenham festival and, because football punters tend to back teams to win, a lack of draws in the Premier League usually provokes a moan.

Here’s a variation on the theme: post-lockdown results “have been more unpredictable than normal”, says William Hill, pushing the popular theory that the absence of crowds is affecting results. “We continue to see volatile gross win margins,” it adds.

Hold on a minute, though, surely unpredictability is helpful for a bookmaker? A healthy helping of upsets means favourites aren’t winning every time, which is the traditional worry for the setters of odds. Aston Villa beating Liverpool 7-2, for example, will have wrecked a few people’s accumulator bets.

On closer inspection, William Hill probably isn’t complaining. It’s just dressing up its comments that way because everyone hates a happy bookie. Note how the firm didn’t put a number on its gross win margin in the latest trading quarter: it just used the word “volatile”. Volatility, for a bookie, is fine if the average over a period comes out roughly where it normally does.

One suspects that’s exactly what’s happened. It was a pain for the bookies that it took until Monday this week for the Premier League season to produce a 0-0 score line (they like those). On the other hand, six out of 10 fixtures in the latest round of matches were draws, which was splendid outcome from their point of view. There is no reason to shed tears for the bookmakers.