BP shares gain despite worst results since pandemic

BP’s share price has gained 7.5% over the past six months, a surprising fact given its torrid financial performance over that period.

BP’s Q4 results announcement this morning (11 February) was its worst for four years, but BP shares have bounced, as rumours of an activist investor stake have fuelled the stock.

Underlying profit for the quarter came in at $1.17 billion, down 48.5% year-over-year. Annual profits fell 35.5% to $8.92 billion, marking BP’s worst results since it lost $5.7 billion in 2020, in the midst of the Covid pandemic.

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“The company’s fourth-quarter profits plummeted year-over-year, as weakening margins significantly dented the oil major’s bottom line,” said Mark Crouch, market analyst at eToro.

BP shares, however, opened 0.8% up this morning, following gains of 7.4% yesterday.

BP’s shares have been on a downward trend since last April, but having bottomed during November they have been staging a rally since: in the last month, BP shares have gained 9.7% compared to the FTSE 100’s 6.3%.

While BP’s results might have been expected to prompt a fire sale, its shares are instead riding a wave of optimism that its fortunes could be about to turn, with investors eagerly awaiting the company’s capital markets day on 26 February.

“The company recognises that it has work to do with shareholders, and getting this right will be key for the return of investor confidence which has been negatively influenced by poor share price performance in 2024,” said Maurizio Carulli, energy and materials analyst at Quilter Cheviot.

While not one of the most-bought stocks on Interactive Investor’s platform, BP’s (LON:BP) shares are highly popular on other investing apps. For example, it was the second-most-bought stock on AJ Bell during 2024.

Who is Elliott Investment Management?

BP’s share price gains over recent days have followed reports that Elliott Investment Management has acquired a significant stake in the company, according to insiders familiar with the matter cited by Bloomberg.

Elliott Investment Management is a New York-based investment manager, affiliated with the hedge funds Elliott Associates L.P. and Elliott International Limited. The group, collectively known as Elliott, managed just under $70 billion in assets, as of 30 June 2024.

Elliott has a reputation for aggressive activist investing. It has previously run campaigns targeting the likes of energy giant SSE, pharmaceuticals firm GSK, and Anglo-American.

Last year, Elliott had a bid rejected to take over UK retailer Curry’s.

Previous campaigns that Elliott has run include substantial corporate restructuring, often breaking up larger companies into smaller segments and selling some of these off. The Wall Street Journal reported on 6 February that Honeywell will split into three independently-listed companies under pressure from Elliott, which first disclosed its position in November.

Some activist investors prompt a negative reaction – see Saba Capital’s attempts to displace boards of seven UK investment trusts, for example.

Elliott, however, has a reputation for success.

In calling for Honeywell’s breakup, Elliott highlighted the success of its breakup of General Electric (GE).

Last April, GE completed a breakup of its business into three separate entities formed out of its aerospace, energy and healthcare divisions. The three businesses now have a combined market value almost four times that of GE in 2022.

BP’s share price has reacted positively to rumours of Elliott’s stake because investors expect that Elliott’s actions will turn around a business that is clearly struggling, and increase its overall value.

“Amid what appears to be an ongoing identity crisis for BP, Elliott, one of the world’s largest and most activist hedge funds, is likely to push for a strategic realignment,” said Crouch. “With a reputation for shaking up underperforming companies, the firm could help BP refocus on its core strengths, namely oil and gas production, and for BP’s shareholders, at not a moment too soon.”

What changes might Elliott make to BP?

Besides breaking BP up, which is certainly one possibility, there are various courses of action that Elliott could take now that it has a substantial stake in BP.

It is expected that it will shift the firm’s strategy away from its renewables business, which has so far generated lacklustre results, and towards its core oil and gas businesses.

Elliott’s influence could even see BP become the latest company to join the London stock market exodus, with the FT citing a top-25 shareholder speculating that the hedge fund could push for BP’s listing to be moved from London to New York.

It should be noted that, at present, all of these are speculative, and that neither BP nor Elliott has confirmed the size of the latter’s stake.