Analysts see interim CEO Murray Auchincloss as the logical candidate to steady the BP ship, while the company’s shares remain undervalued in relation to its peers.
Formerly BP’s (LON:BP) finance chief, Mr Auchincloss stepped up to the interim CEO role in September following the sudden resignation of Bernard Looney amid the disclosure of historic relationships with colleagues.
The Canadian executive remains among several potential candidates who could take the helm at the 114-year-old energy giant, but has reportedly won the backing of many shareholders to take the position on permanently.
In a note on Monday, RBC Capital Markets analyst Biraj Borkhataria suggested Mr Auchincloss is “likely to be confirmed” as CEO in the coming months and is viewed by the bank as “the most logical successor”.
That is not to say the oil giant is not considering its options; last week Sky News reported that executive search firm Egon Zehnder had been brought in to help identify a replacement.
However Mr Borkhataria suggests an external hire could “add more uncertainty” to the company’s overall strategy, “while also raising questions on board competence.”
“We see the confirmation as important symbolically to show a steady ship. In terms of distributions, the current framework or returning ‘surplus’ cash flow leaves too much guess work for investors,” he added.
“We think BP should outline a CFFO commitment, while also moving to a backward-looking buyback programme, which should help with predictability.”
Notably, BP has not chosen an external candidate for the top job in recent years.
Questioned during the company’s Q3 results as to whether he had already been officially granted the position, Mr Auchincloss demurred and stated that both he and chief financial officer (CFO) Kate Thomson would retain their “interim” titles as the company continued its search.
Meanwhile, internal candidates previously tipped to be in the running include the group’s Norwegian chairman Helge Lund, executive vice president William Lin and the leader of the company’s gas and low-carbon business Anja-Isabel Dotzenrath.
Rating boost in 2024?
Meanwhile analysts found that BP’s share price has lagged peers this year following “two disappointing sets of results” and the departure of Mr Looney, all of which have undermined investor confidence somewhat.
As a result, RBC argues that the BP’s current share price “undervalues the business” – a long-running theme as UK and European-headquartered oil giants continue to trade at significant discounts to their US rivals.
Nevertheless, Mr Borkhataria suggests BP’s trading business performed “exceptionally well”, and despite downward revisions this year finds the group’s expectations similar to peers.
Moreover, it notes the company’s target to boost its credit rating from ‘A-’ and to make progress “in the A range”.
And though it has higher debt than some peers, RBC sees the company’s metrics “at the required level, with room for further improvement” in the coming years.
“We see the upgrade as a when, not if, for the company,” it continues, and positing a potential uptick in “early 2024”.
“With the CEO confirmation due soon, and the credit upgrade seeming imminent, we believe risk-reward is set up more positively.
“With sentiment having turned much more negative recently, we see an attractive opportunity for investors.”