Released December 03, 2024 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Many publicly traded companies struggle to balance the hunt for profits with the pursuit of principle. This dilemma is especially profound for Oil and Gas producers: some of their products, notably oil and natural gas, contribute to global warming. Other product lines, such as wind power, solar power and hydrogen, are seen as critical elements in the fight against global warming.
The struggle has been particularly acute for BP (NYSE:BP) (London, England), which has deep roots in both businesses. Profits, however, have won out at the London-based supermajor: Tucked away on page 13 of its 16-page third-quarter earnings report, it said it will be "focusing" its investments in hydrogen and renewables as part of the drive to increase the focus and efficiency in its cash costs.
Over the next decade, BP will scale back its hydrogen portfolio to five to 10 projects, Chief Financial Officer Kate Thomson said in announcing third-quarter results October 29. As many as 18 projects could get the axe, news sources reported. Among its integrated supermajor peers, BP has long been one of the weaker performers, with earnings and stock prices trailing its peers. For more on that, see November 14, 2024, article - Softer Market, Lower Commodity Prices Drag Down Earnings for Big Oil.
The October 29 announcement noted BP's earlier decision to sell its existing U.S. onshore wind energy business, which has interests in 10 operating wind projects across seven states. BP operates nine of those 10 projects. The company's net share of those projects' generating capacity is approximately 1,300 megawatts (MW). All of those operating wind projects are connected to the electric grid and are providing power to a range of customers. The nine operated assets are controlled through a remote operating center in Houston.
The supermajor said it will consolidate other renewable energy projects under its Lightsource BP brand. In a September 16 news release announcing the wind power sale, William Lin, BP's executive vice president for Gas & Low Carbon Energy, said, "Renewables are an important part of our strategy as bp transitions to an integrated energy company. This planned divestment is part of our strategy of continuing to simplify our portfolio and focus on value."
Speaking on the October 29 third-quarter earnings announcement, Thomson estimated that selling the U.S. onshore wind business and scaling back its hydrogen ambitions would save about $200 million per year in 2025 compared to a 2023 baseline.
She said the decisions aligned with two of BP's six priorities: to drive focus into the business and deliver growth projects. Continuing to pursue onshore windpower in the U.S. and developing hydrogen projects around the world apparently impinged on a sixth priority: grow shareholder returns.
BP did not say which projects would be culled and which would continue to be nurtured. Industrial Info is tracking 24 hydrogen projects around the world in which BP has a stake. The total investment value (TIV) of those projects is about $9.3 billion. Two of those planned projects are deemed to have a "high" probability of moving forward according to their project schedule. Seventeen have a "medium" probability and five have a "low" probability.
By country, BP's most significant hydrogen projects under development are in Oman, Egypt, the U.S. and the U.K. The current portfolio includes more "green" hydrogen projects, where electrolyzers powered with non-emitting electric generation split water into its constituent elements of hydrogen and oxygen, than "blue" hydrogen projects, where hydrogen is extracted from natural gas.
On the third-quarter earnings call, Chief Executive Officer Murray Auchincloss said, "We will be very, very returns focused, making sure that the new businesses compete on a competitive level with the historic businesses for scarce capital. ... We're firmly focused on growing cashflow through the decade, with significant optionality in our oil and gas resource base and, in transition we're staying disciplined, focused on ensuring we deliver returns and value for shareholders."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
The struggle has been particularly acute for BP (NYSE:BP) (London, England), which has deep roots in both businesses. Profits, however, have won out at the London-based supermajor: Tucked away on page 13 of its 16-page third-quarter earnings report, it said it will be "focusing" its investments in hydrogen and renewables as part of the drive to increase the focus and efficiency in its cash costs.
Over the next decade, BP will scale back its hydrogen portfolio to five to 10 projects, Chief Financial Officer Kate Thomson said in announcing third-quarter results October 29. As many as 18 projects could get the axe, news sources reported. Among its integrated supermajor peers, BP has long been one of the weaker performers, with earnings and stock prices trailing its peers. For more on that, see November 14, 2024, article - Softer Market, Lower Commodity Prices Drag Down Earnings for Big Oil.
The October 29 announcement noted BP's earlier decision to sell its existing U.S. onshore wind energy business, which has interests in 10 operating wind projects across seven states. BP operates nine of those 10 projects. The company's net share of those projects' generating capacity is approximately 1,300 megawatts (MW). All of those operating wind projects are connected to the electric grid and are providing power to a range of customers. The nine operated assets are controlled through a remote operating center in Houston.
The supermajor said it will consolidate other renewable energy projects under its Lightsource BP brand. In a September 16 news release announcing the wind power sale, William Lin, BP's executive vice president for Gas & Low Carbon Energy, said, "Renewables are an important part of our strategy as bp transitions to an integrated energy company. This planned divestment is part of our strategy of continuing to simplify our portfolio and focus on value."
Speaking on the October 29 third-quarter earnings announcement, Thomson estimated that selling the U.S. onshore wind business and scaling back its hydrogen ambitions would save about $200 million per year in 2025 compared to a 2023 baseline.
She said the decisions aligned with two of BP's six priorities: to drive focus into the business and deliver growth projects. Continuing to pursue onshore windpower in the U.S. and developing hydrogen projects around the world apparently impinged on a sixth priority: grow shareholder returns.
BP did not say which projects would be culled and which would continue to be nurtured. Industrial Info is tracking 24 hydrogen projects around the world in which BP has a stake. The total investment value (TIV) of those projects is about $9.3 billion. Two of those planned projects are deemed to have a "high" probability of moving forward according to their project schedule. Seventeen have a "medium" probability and five have a "low" probability.
By country, BP's most significant hydrogen projects under development are in Oman, Egypt, the U.S. and the U.K. The current portfolio includes more "green" hydrogen projects, where electrolyzers powered with non-emitting electric generation split water into its constituent elements of hydrogen and oxygen, than "blue" hydrogen projects, where hydrogen is extracted from natural gas.
On the third-quarter earnings call, Chief Executive Officer Murray Auchincloss said, "We will be very, very returns focused, making sure that the new businesses compete on a competitive level with the historic businesses for scarce capital. ... We're firmly focused on growing cashflow through the decade, with significant optionality in our oil and gas resource base and, in transition we're staying disciplined, focused on ensuring we deliver returns and value for shareholders."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
