BP has revised its capital expenditure plans and announced the resignation of its strategy chief following pressure from Elliott Management, amid the company’s profits for the first quarter declining by half.

The major oil company reported a profit of $1.38 billion for the first quarter, a significant drop from $2.72 billion recorded during the same period last year. This reduction is largely attributed to diminished refining margins and underwhelming performances by its oil and gas trading divisions.

The results fell short of the $1.53 billion projected by analysts even after a cautious trading statement released earlier this month, putting additional pressure on BP’s CEO, Murray Auchincloss.

By the close of trading on Tuesday, BP’s shares had dropped by 8p, or 2.4 percent, settling at 353p. The oil corporation also reported a rise in net debt and scaled back its share buyback program.

In February, Auchincloss initiated a “fundamental reset” of BP’s strategic direction to focus more on traditional oil and gas while cutting back on green investments.

Elliott Management, a prominent activist hedge fund based in New York, has accumulated a stake exceeding 5 percent in BP and is advocating for more significant changes. Their recommendations include additional spending cuts, the removal of Giulia Chierchia—executive vice-president for strategy, sustainability, and ventures—and a complete exit from renewable energy.

On Tuesday, BP announced a $500 million reduction in its 2023 capital spending, bringing it to $14.5 billion due to market volatility. Chierchia, a key figure behind BP’s previous green strategy, is set to depart at the beginning of June. BP indicated it might divest additional assets worth up to $1 billion beyond earlier estimates this year.

BP confirmed that Chierchia was “leaving to pursue other opportunities, and her position will not be filled”. Her teams will be absorbed into other departments to enhance decision-making efficiency and accountability.

Oil prices have plummeted this quarter, exacerbated by President Trump’s tariffs which have affected global economic forecasts, raising concerns about oil companies’ ability to maintain their spending plans.

BP’s strategy for this year was based on the assumption that Brent crude prices would average $71.50 per barrel. However, Brent was trading below $65 per barrel on Tuesday, with most analysts adjusting their price forecasts down, anticipating reduced oil demand.

Auchincloss noted that while oil prices might fall short of expectations, refining margins were performing better than anticipated, and gas prices were stabilizing. BP has managed to secure an additional $1.5 billion through cuts in spending and heightened divestment efforts to ensure robust plans amid ongoing economic uncertainties.

He stated that forecasting the macroeconomic landscape is challenging, yet BP has not observed a decline in oil demand. “People are worried about decreasing demand, but we haven’t witnessed any reduction for our products so far,” he added.

Key factors influencing oil prices will include the dynamic between the US and Iran, the decisions made by the OPEC+ coalition, and external supply factors, particularly as US drilling activity has seen a decline.

BP has projected its capital expenditure over the next two years to range between $13 billion and $15 billion, though Elliott is pushing for this to be lowered to $12 billion.

Furthermore, BP revealed it would be divesting between $3 billion and $4 billion in assets this year, an increase from the previously stated $3 billion, alongside a share buyback plan of $750 million in the next quarter, positioned at the lower end of its guidance.

BP CEO: Renewable Energy Not Being Abandoned

BP has rejected calls from Elliott Management to completely exit the renewable energy sector, affirming the necessity of retaining ownership of wind and solar farms to “maintain relevance” in the evolving energy market.

Murray Auchincloss, the CEO, explained to The Times that clients within BP’s trading division expect the option to purchase low-carbon energy directly from BP rather than solely relying on third-party electricity sources.

In 2020, under former CEO Bernard Looney, BP set an ambitious target to develop 50 gigawatts of renewable power generation within the decade, equating to the UK’s entire renewable capacity at that time.

Auchincloss has since abandoned this target and scaled down BP’s investments in renewable assets. The company has formed a joint venture with Japan’s Jera for its offshore wind farms and is contemplating the sale of its stake in Lightsource BP, its solar venture, just months after fully acquiring it.

However, Elliott Management reportedly wants BP to eliminate its renewable generation efforts entirely and focus its energy transition strategies on areas such as electric vehicle charging, which they see as a more logical investment.

Defending BP’s position on Tuesday, Auchincloss stated, “We are an integrated energy company, and part of that identity includes maintaining a robust trading division. Customers today expect lower-carbon options, and to stay relevant, we need to adapt.”

He noted that engaging with customers, particularly large data center developers, necessitates providing them with both natural gas and lower-carbon alternatives, whether they be biogas or renewables based on regional availability. “To remain relevant in the trading space, it’s imperative that we incorporate these energy types into our offerings,” he concluded.

Auchincloss expressed that while shareholder concerns have led to a restructuring for a “capital-light” approach in these segments, he doesn’t foresee significant capital investment into renewables in the foreseeable future. Instead, they aim to position themselves as providers of essential low-carbon energy for their customers.

He emphasized that BP’s power trading business has evolved alongside its venture into offshore wind, indicating that ownership of such assets is now crucial for business success. “Market dynamics have changed; if you don’t have control over these assets and can’t package them effectively, clients are hesitant to partner with you,” he added.