This article reflects the opinions of its author and not necessarily those of ShareSoc.
I attended the BP shareholder meeting on 19 April, held at the BP Head Office 1 St James’s Square, along with about 60 – 70 other shareholders. The meeting was organised by UKSA and ShareSoc members were also invited to attend.
The case for investing in BP shares is clear. They plan to grow ROACE to 18% with careful and limited capex split 50/50 between transition (green) energy and traditional oil and gas. If oil prices remain at current levels this will produce huge cash flows (market cap/cash flow of about 4) and profits (market cap £96bn and profits of £23bn).
There was a lot of talk about the tri-lemma of transition, affordability and security of energy supply. The Archea acquisition we were told was exciting, see https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bp-accelerates-and-expands-in-bioenergy-agreeing-to-buy-leading-us-biogas-company-archaea-energy.html but the cash cost is only $3bn so hardly shifts the needle.
The key question I am left with is why BP needs to diversify from what it is good at? The investing thesis is that if investors wish to invest in Green Energy, they can make that decision themselves and they do not need BP to do it for them. If BP has spare cash that it cannot invest in its core business then it should return it to its shareholders who can decide for themselves where to invest it.
BP’s argument is that development of these new green technologies needs scale and BP already has competence in global scale, hence the involvement in hydrogen.
BP is also making a shift to India, and now has 2 NEDs from that country. India is now the most populous country in the world.
The presenters mentioned that today Indonesian gas is a very important part of BP’s business. I was reminded of when I was a consultant to BP in 1987 and asked the then Chair Sir Peter Walters what was the most difficult decision he had to make – he explained he had to take a 40 year view of the politics of Indonesia and decide whether to invest tens of billions in that country.
I thought it was a really useful meeting that BP held with its retail shareholders, and a very good example of how a large company can combine shareholder engagement with an effective and useful AGM. It was a great chance for shareholders to raise questions and get answers, and complements the more formal AGM setting. UKSA and ShareSoc will be pressing more companies to follow this fine example. With the growing use of hybrid and digital AGMs, a pre-AGM retail shareholder meeting becomes even more important.
The presenters Ben Matthews, Company Secretary, Geoff Carr, VP Investor Relations and Alan Haywood, Head of ESG, did a good job and allowed a good 30 minutes for questions followed by informal discussions and networking over a light lunch, which was much appreciated.
BP requested that shareholders vote against the shareholder submitted resolution 25, from Follow This! Last year 15% voted against a similar resolution. I must admit I am not sure how to vote. I would not want the shareholder resolution Resolution 25 to be approved, but I am environmentally conscious and sending a signal to BP about its importance is a good idea, so a vote against the management’s recommendation (ie for the resolution) in the 15 to 20% range might do this.
On the other hand, perhaps we shareholders should tell BP to do what it is good at and give us shareholders back our money to invest elsewhere. To some extent this is what BP is doing, with its high dividend yield and share buy backs.
I am not sure I approve of, for example, L&G’s position which to me smacks of greenwashing and is possibly a marketing ploy.
In summary, BP shares look, in my opinion, a buy on fundamentals, but are out of favour with the ESG community.
Cliff Weight, Member of ShareSoc and UKSA
Disclosure: I own BP shares and have done since the 1980’s. Following the meeting I have bought some more!
At the AGM, Resolution 25 was supported by 18% of shareholders. So a message was sent that a minority of shareholders were sufficiently concerned that they voted against management.