Spending $5bn a year on green projects is some jump for the oil major, but only one third of what it will spend on fossil fuel drilling
So that’s what boss Bernard Looney meant by “reimagining energy and reinventing BP”: an oil explorer that no longer explores for oil. Or at least not with the same ferocity that it has done in the past. Don’t expect it to drop the “Petroleum” in “British Petroleum” just yet. But less crude means less generous rewards for shareholders. Payouts, and progressive ones at that, have always been sacrosanct among the oil giants. Indeed, it was only back in February that Looney’s predecessor Bob Dudley boasted in his farewell speech of “a powerful investor proposition of growing distributions over the long term.”
Well, farewell to that too, or half of it at least, though one wonders why Looney didn’t just cut it when he took over, instead of acting like BP had discovered a miraculous formula that enabled it to meet climate targets while continuing to chuck billions of pounds at shareholders every year, at the same time as oil prices languish on the floor.
If Looney was dreading this moment, he needn’t have. BP’s shares bounced more than 7pc on the news, propelling it to the top of the FTSE leaderboard for part of the day despite unveiling a jaw-dropping $17.7bn (£13.5bn) quarterly loss, as well as forgoing its short-lived status as the biggest single-payer in the FTSE 100 after Shell surrendered that crown in April.
Even investors it seems have accepted two very important facts: first BP needs to ramp up investment in green energy; second, its debt mountain must be reduced. Halving a dividend that was set to cost £6.7bn this year will help on both counts.
As Looney now concedes, he needs to “reset” BP if it is to stand any chance of meeting his bold “net zero” emissions pledge and the Paris climate change goals. The pandemic may have savaged demand for oil but it has provided the industry’s big beasts with the best opportunity they will get to accelerate the sweeping changes required to prepare for a future without fossil fuels.
Annual low carbon investment will be fired up to around $5bn a year, a 10-fold jump on current levels. That means BP’s global renewable power generation will have gone from 2.5GW in 2019 to 50GW by the end of the decade, more than the whole of the UK currently has at its disposal. At the same time, its oil and gas production will shrink 40pc.
Even the company’s biggest critics had to acknowledge it is a bold step. Greenpeace UK’s chief scientist Doug Parr described it as “a pretty big change from BP”, while the green shareholder activist group Follow This said BP was “the first to walk the walk”.
And yet, it is still too soon for champagne corks. Five billion dollars is undoubtedly a big jump from the paltry $500m BP currently spends a year on green projects, but it is only one third of the $14bn to $16bn it will still be forking out on oil and gas drilling in 10 years’ time. And for that reason, there’s more reimagining needed.
‘Greenpeace UK’s chief scientist described it as a pretty big change from BP’
Diageo’s lockdown hangover
Like all companies, this year has been one of “two halves” for drinks giant Diageo but its problem is that people haven’t been drinking enough halves, or shots, or cans, or any other measures.
There’s an assumption that while the human race has been holed up at home during lockdown, everyone has been getting sozzled in their pyjamas while watching Homes Under the
Hammer or whatever the overseas equivalent is. That may actually be true but the Guinness and Johnnie Walker whisky maker relies on pubs, clubs and restaurants for a big chunk of its trade, and with drinking venues closed from the end of March until July, profits have halved and the company has taken a £1.3bn hit on the value of various units.
Diageo’s great strength over the years has been its geographic reach. It is one of the FTSE’s few truly global constituents with sizeable operations on six of the world’s seven continents. Its reach is meant to be a nifty hedge so that if one corner of the sprawling booze empire is a little lacklustre, other parts pick up the slack.
Instead, with the pandemic raging, Diageo is struggling in every market. It has written down businesses in India, Nigeria, Ethiopia and South Korea; sales fell in Europe, Latin America, Africa, and Asia; and customers drank less scotch, vodka, rum, gin and beer.
A rare bright spot was North America, where tequila sales trebled. Boss Ivan Menezes could probably do with a shot or two to calm his nerves.
Wing and a prayer for Boeing
The Federal Aviation Administration has laid out four requirements that the Boeing 737 Max passenger jet must meet before it can return to service, including alterations to the plane’s wiring and flight control software. A more obvious one might be that it stops falling out of the sky.