By Rohit Nair, Corporate Ratings

Further streamlining looks set to be a priority to prime the company for future expansion.

Our current baseline view of BP of incorporates currently planned divestments and cost savings designed to arrive at a leaner balance sheet, but it will be important to see the pace at which these plans are executed.

Furthermore, we do not factor in any large acquisitions or transformational new projects of the kind O'Neill has initiated at Woodside. Any such move by the new management will remain among the key rating sensitivities.

CEO appointment comes as BP ditches "integrated energy company" project

The departure of Murray Auchincloss follows that of former chairman Helge Lund and former CEO Bernard Looney who had previously set out to transform BP into an “integrated energy company” from an oil and gas (O&G) supermajor. BP had appointed Albert Manifold to replace Helge Lund.

The new CEO-elect is known for her deep operational roots developed in ExxonMobil and a reputation for aggressive hydrocarbon expansion at Woodside.

So, this appointment underlines a decisive pivot back for BP to O&G from the ‘hybrid’ renewable energy diversification that had alienated institutional capital and depressed the company’s valuation relative to its transatlantic peers.

O'Neill likely to focus first on delivering BP's restructuring plans

For BP and O’Neill, we expect the next two to three years to be focused on portfolio simplification and cost cutting, before the kind of expansion which she led in her previous roles.

• BP had formulated a plan to divest USD 20bn of assets by 2027: we expect the divestment to be accelerated, and a larger number of low-return onshore wind and solar assets to be sold where BP has no significant competitive advantage.
• We also expect green projects within BP to face stricter “value” tests in terms of generating ROCE and lesser green projects to get approval
• Similarly, BP’s announcement of USD 2bn of cost savings by 2026 is also likely to be fast-tracked, most likely through disposal of higher-cost projects.

O’Neill has a history of explicit O&G oriented decision making even in the face of environmentalist opposition, such as the Scarborough gas project and Pluto Train 2 and a documented willingness to publicly confront the anti-fossil fuel narrative.

Still, for all of the capital spending by O’Neill at Woodside including the acquisition of BHP’s petroleum business, the USD 12bn investment in Scarborough and the USD 17.5bn investment approved for Louisiana, Woodside’s share price has trailed behind BP’s in recent years.