Elliott hedge box raises the heat on BP with demand for a high cash flow

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Elliott Management presses BP to increase the free cash flow by an additional 40 percent through the deep discounts of spending, as the active investor raised his stake in the energy group to more than 5 percent and sharpen the company’s criticism.

I told the US -based hedge fund BP The “basic resets” set by the CEO of the Oil and Gas Group Murray Usinglos in February does not go far and presented an alternative plan, according to people familiar with discussions.

Elliot BP urges the conversion of its focus from the development of its oil and gas business to set a goal of $ 20 billion in the annual free cash flow by 2027, according to persons familiar with the discussions. This represents a 40 percent increase on the implicit goal in February when BP revealed its axis away from renewable energy sources and more than twice as much as the “modified” free “8 billion dollars in the past year.

“It took Murray 18 months to reach a three -year plan that is not ambitious or urgent.” “The time is not besides BP here, with the macroeconomic environment and with the depletion of the investor’s patience. Continuing to the continuous performance of BP makes it open to acquisition.”

British Petroleum announced on Tuesday that Elliot has increased its share to a little more than 5 percent, at a value of about 2.8 billion pounds, which puts a shareholder on an equal footing with Vanguard, the second largest investor in the company. BP shares have decreased by 18 percent since the announcement of the new strategy, reducing its market value to 57 billion pounds.

The hedge fund believes that BP has a road to a higher evaluation if it could be more disciplined in its spending, which reduces capital expenditures to $ 12 billion annually instead of $ 13 billion to $ 15 billion by the company. Elliott also believes that BP can achieve $ 5 billion of cost savings exceeding its current goal.

the active It is also believed that BP should sell solar and external wind energy companies, and that there is room to reduce spending through their oil and gas business because its future oil resources are sufficient. “In part of the oil and gas, it is not related to the pursuit of growth, but rather to discipline in investment,” said the person familiar with Elliot’s thinking.

Elliot complained that the administration does not recognize the roots of the company’s problems, which exceed The strategic axis away from renewable energy sourcesPeople said.

A person familiar with Elliot’s view said: “The diagnosis of management was everything about feelings and atmosphere. Elliot’s diagnosis is that it is also about their execution during the past few years, and how they allowed costs to accumulate. It is an implementation story.” They added that there is a reason for the belief that there should be wider changes in BP employees until after the planned departure of Lund, the chair.

A quarter of BP shareholders Voice against Lund At the annual meeting of the company last week, which reflects the investor’s frustration with poor performance.

The people said that examples of poor capital discipline in BP included excessive spending in the Tortue Lng project in Senegal and the high costs of Devon Energy when she withdrew from a joint sharing of rock oil in the United States. They also said excessive spending in BP business in the United States of America, $ 4 billion, was risky due to the dependence of fuel on federal tax credits and unspecified market prospects.