A week after revealing its plan to turn itself into a clean-energy giant, BP Plc watched its share price drop to a 25-year low. Falling crude prices and fears of the second wave of the coronavirus haven’t helped BP. BP’s European peers are also trying to answer the same questions, with varying degrees of success. Royal Dutch Shell Plc, which also made a deep cut to its dividend this year, is barely trading above the post-pandemic share price low reached in March. Total SA has so far done a better job of maintaining investor confidence in its energy-transition plan.
BP’s reinvention is a reduction in oil and gas production and simultaneous growth in its renewables business. BP’s challenge lies in the building up of its skill set in renewable energy solutions and a competitive advantage in its chosen areas that allows investors to believe they can deliver attractive financial returns from the capital allocated. Getting BP into a position where it can deliver profits from large-scale renewable energy projects will require lots of upfront spending. The company made a $1.1 billion splash in offshore wind earlier this month, buying a stake in developments owned by fellow oil giant Equinor ASA. The near-term milestones laid out last week suggests that more deals will follow.