In what analysts are calling the “final pivot,” BP has confirmed its future lies with fossil fuels by announcing a $5 billion cut to its green energy assets. The massive writedown draws a line under the company’s experiment with becoming an “integrated energy company.”
The decision involves scrapping hydrogen projects in the UK, Oman, and Australia, and seeking to exit solar investments. The company is stripping its portfolio back to its hydrocarbon core, betting that oil and gas will remain the world’s dominant energy sources.
The move comes as the company faces a tough market. Oil prices have fallen, and trading profits are down. However, the company believes that a focused fossil fuel strategy is the best way to navigate these challenges.
The pivot is supported by a strong balance sheet. The reduction of net debt to the $22-$23 billion range provides the financial stability needed to execute this back-to-basics strategy. It is a defensive move designed to preserve value.
With incoming CEO Meg O’Neill set to lead this new era starting in April, the company has set its course. The green ambition is gone, replaced by a pragmatic focus on oil, gas, and shareholder returns.