BP's sudden CEO change shocks investors, signals shift in company strategy

By Mitchell Ferman, Kevin Crowley and Ruth Liao

 

No warning, just a late-night revelation: BP Plc was ousting its CEO and filling the role with an outsider, vetted during a top secret process that only a handful of people even knew was happening.

 

The news came via a 10 pm London time press release on Wednesday. That was when many senior company leaders found out about the move. 

 

Within minutes, there were chats and messages flying back and forth expressing surprise over Murray Auchincloss’s sudden departure. Staffers rushed online to find out more and found colleagues doing the same, according to people familiar with the matter.

 

Auchincloss had been in the chief executive role less than two years and just this February had unveiled a strategic reset. His replacement will be Meg O’Neill, the company’s first external CEO hire in its 115-year-old history and a fossil-fuel enthusiast who underscores BP’s hard pivot back to oil and gas. 

 

O’Neill has been given license for a complete page-turn, along with a mandate to look at all aspects of the business afresh on their merits, according to a person familiar with the matter. A key focus will be the US, the person said.

 

It’s the kind of bold move many investors have been waiting for. 

 

BP has lagged behind rivals due to a combination of corporate disasters, war, lackluster returns from its renewables efforts and some bad luck. That led to pressure from activist investor Elliott Investment Management, and a turnaround effort that has struggled to impress shareholders. So while staff inside BP were surprised by the sudden CEO change, outsiders see positive potential in the shakeup. 

 

“An external perspective is likely to facilitate a faster move, especially as it relates to culture, while the company pivots towards a greater focus on returns and production growth,” said Joshua Stone, a UBS analyst. 

 

BP declined to comment on the CEO swap beyond its public statement. Chairman Albert Manifold said the move “creates an opportunity to accelerate our strategic vision to become a simpler, leaner, and more profitable company.” 

 

“Increased rigor and diligence are required to make the necessary transformative changes to maximize value for our shareholders.”

 

BP staffers received a video from Manifold and interim CEO Carol Howle discussing the news, said the people who asked not to be named because they weren’t authorized to talk publicly. Auchincloss was given a cordial — if short — thank you. 

 

Rising Star 

O’Neill is moving to BP from Woodside Energy Group Ltd., where she spent four years in the top job with a clear focus on fossil fuels, growing the company from an Australia-focused producer to a global LNG powerhouse. She previously spent more than two decades at Exxon Mobil Corp., where she was one of the Texas oil giant’s rising stars.

 

It’s the latest in a slew of leadership shifts over recent years, including the appointment of Manifold as chairman in July after pressure from Elliott.

 

BP’s turmoil has been more than a decade in the making. Many point to 2010 as the start of the problems, when an explosion aboard the company’s Deepwater Horizon drilling rig killed 11 people and triggered the worst offshore oil spill in US history in the Gulf of Mexico. The company agreed to pay more than $65 billion in fines and damages, and it is still paying about $1 billion annually today. BP shed more than half its value after the disaster, and its market capitalization has yet to recover.  

 

More hurdles ensued, including what Auchincloss had dubbed as “misplaced” optimism over the pace of the energy transition that took the company “too far, too fast” into renewables and away from fossil fuels. There was also a bet on Russia that went awry in the wake of the war in Ukraine. 

 

Auchincloss promised investors that the company “can and will do better” as he embarked on fresh reviews of its portfolio and costs just weeks after Manifold’s appointment was announced. Earlier, Auchincloss in February unveiled BP’s strategic pivot to oil and gas and away from failed low-carbon bets.

 

Behind the scenes, Manifold was concerned the changes were too slow and Auchincloss told the chairman that he would understand if the company went with someone better suited.

 

Manifold wanted to take stock of the company and came to his assessment fairly quickly, a person familiar said. Privately, he engaged with Elliott Investment Management on multiple occasions and the conversations were constructive, according to a person with knowledge of the matter.

 

Manifold is said to view the US as a strategic priority for BP and was impressed at how O’Neill grew Woodside’s operations there.

 

Pace of Change 

While BP staffers are reeling, many analysts and investors were upbeat about the change. 

 

“O’Neill comes with the right background to deliver” on BP’s strategic return to oil and gas, said Iain Pyle, senior investment director at Aberdeen Investments, a BP shareholder. “It’s a company that has always promoted from within, but given the push to accelerate the pace of change through the business an external view may well be helpful at this point.”

 

O’Neill’s rise had been building for years.

 

Inside Woodside, current and former colleagues describe O’Neill as analytically rigorous and intensely prepared. Born in Boulder, Colorado, O’Neill has argued that pragmatism, not ambition alone, should determine which climate solutions survive. That approach underpinned her view that natural gas, particularly liquefied natural gas, is a long-term necessity for global energy. 

 

Early in her two-decade career at Exxon, she was designated as having “high potential,” indicating potential C-suite material. During her stint in Indonesia in the early 2000s managing LNG operations, she became known as a strong listener and collaborator — rare at Exxon in those days. Her rising-star status was sealed when she kept gas flowing in the aftermath of the country’s devastating 2004 tsunami, according to a person familiar with her time at Exxon. She later led Exxon’s businesses in Canada and Norway and oversaw Asia-Pacific operations during the region’s LNG boom.  

 

O’Neill’s experience and skills put her on a path for a major position in the energy world. 

 

Enter Manifold. On his first day as BP chairman in October, he told staff that the company’s strategic direction was correct, but that they must act with “urgency.” 

 

Chatter about Auchincloss’s possible exit had started to die down this fall, particularly after two straight quarters of earnings results that beat analyst expectations. Meanwhile, Manifold and some members of the board were quietly searching for his replacement, according to people familiar with the matter. 

 

On Thursday, hours after O’Neill’s shock appointment, Howle — who overnight went from head of trading to interim CEO — convened senior global leaders for a call.

 

Many staffers are feeling tired out after years of strategic swings, leadership changes and performance challenges. The surprise factor this week didn’t help. 

 

O’Neill has a long list of challenges ahead — a big one will be energizing an exhausted workforce, one of the people said.