As BP contemplates the future without Bernard Looney, the ‘cash machine’ – which the former BP boss referred to last year – is ramping up again.
Saudi Arabian oil exports plummeted to their lowest level for two years in July as ruler Mohammed Bin Salman, in concert with Moscow, sought to prevent oil prices subsiding by cutting production.
The squeeze on oil importing nations is working. The benchmark price for Brent crude has jumped to around $95-per-barrel and prices are rising at the fastest pace since Putin invaded Ukraine.
With prices at elevated levels, oil majors are in for another profits bonanza.
The change in market conditions is likely to be a big factor as BP’s chairman Helge Lund, and a divided and ineffectual board, search for a new chief executive.
Undervalued: BP has a reputation as one of the more nimble exploration and production companies
When the oil price was last at present levels, Looney found himself under pressure to cut back on his green ambitions and improve payouts to shareholders.
The lowering of BP’s ambitious carbon reduction targets, from 35 per cent-40 per cent by 2050 to 20 per cent-30 per cent, angered the green lobby and Labour’s Ed Miliband, but didn’t go far enough to assuage disgruntled investors.
Lund will need to decide whether, after the curtailed Looney leadership, even the more modest climate change targets will be sufficient to restore investor faith.
BP has a reputation as one of the more nimble exploration and production companies, and in spite of setbacks in recent decades is almost certainly undervalued.
Indeed, the possibility that it could find stake builders on its share register, or even become a takeover target, are very real.
With a current market value of £85.6billion it is a tiddler in a world of whales. Top of the league is Saudi Aramco, worth $2.2 trillion (£1.78 trillion), followed by Exxon, valued at $465.2billion (£375billion).
Not for the first time, UK-based rival Shell, valued at £172.6billion, could potentially see the opportunity for a bear hug.
Looking further afield, the world’s most shrewd investor, Warren Buffett of Berkshire Hathaway, has made no secret of his interest in big oil.
He has already shelled out $13.5billion (£10.9billion) for a strategic stake in second tier US oil group Occidental.
A raid on BP would require some quick thinking in Whitehall given the special status it has enjoyed down the decades.
A long period of uncertainty without a defined leadership plan and a refresh of the balance between profits, dividends and share buybacks could leave BP vulnerable.
Full details of the personal drama which led to Looney’s departure are still unknown. With every party lawyered up to the hilt – Looney has engaged legal sharp shooters Mishcon de Reya – details may be slow to emerge.
But it is unfinished business which is doing reputational damage to BP and has done personal damage to Looney.
The immediate upheaval is far from over.
Nuclear summer
As a supporter of renewing Britain’s fading infrastructure, it is good to see the Government pressing on with fundraising for a new 3.23 gigawatts nuclear power station Sizewell C.
The UK has committed £700million to the Électricite de France project and is now seeking support from private sector investors.
Nevertheless, having spent the summer in Walberswick on the Suffolk coast, where the existing Sizewell plant dominates the skyline in a largely unspoilt corner of England, one can understand reservations about such an out-of-scale project in Constable country.
Posted minutes of Walberswick council’s most recent meeting seemed reconciled to the idea as long as there are local jobs and economic benefits.
But years of construction trucks on narrow country roads, together with water contamination fears, loom large. A friend, a nuclear scientist, quipped that swimmers on that coastal stretch would no longer need their wetsuits. What a terrifying thought.
New age
Sir Martin Sorrell is an executive and entrepreneur in for the long game as followers of the ups and downs of WPP, which almost came to grief in a 1990s credit crunch, will recall.
Revenue woes of Sorrell’s quoted digital advertising vehicle S4 Capital have seen the shares plummet from a peak of 870p in 2021 to less than 74.8p in latest trading.
Sorrell is a force of nature and younger than the gerontocracy fighting it out in Washington DC. But even Sorrell must have doubts as to whether he, alone, can pull S4 out of its nosedive.
