Incoming BP Finance Chief Faces Two-Pronged Challenge

By Nina Trentmann 

BP PLC's incoming chief financial officer faces a two-pronged challenge as the U.K. oil-and-gas giant is under pressure to increase investments in renewables without sacrificing shareholder returns.

The company on Tuesday appointed Murray Auchincloss as its next finance chief, effective July 1. Mr. Auchincloss, since 2015 CFO of BP's upstream business, will succeed Brian Gilvary, who will retire in June after more than eight years as CFO and 34 years with the company.

Mr. Auchincloss is part of a new management team at BP led by incoming Chief Executive Bernard Looney, currently head of BP's upstream division, who in February will replace Bob Dudley. Mr. Dudley is credited with steering BP through the aftermath of the Deepwater Horizon oil-spill disaster, in part by divesting assets and deleveraging the company's balance sheet.

Stricter international climate protocols such as the Paris Agreement and a stronger investor focus on environmental, social and governance criteria present a range of challenges for BP's new management.

Executives at other major energy companies, such as Royal Dutch Shell PLC and Total SA, are navigating similar challenges.

Mr. Auchincloss is expected to focus on BP's capital efficiency, building on his experience as CFO of the upstream business, analysts said. "They have to be much more disciplined with capital allocation," said Christyan Malek, JPMorgan Ltd.'s head of oil-and-gas research for Europe, the Middle East and Africa.

This is necessary to free up capital needed for continued investments in the company's oil-and-gas business, as well as increased allocations to renewable sources of energy, analysts said.

Alongside its expansion in the renewables sector, BP must maintain its investments in oil and gas, as short-term demand for oil -- a high-margin business -- continues to grow and as shareholders demand returns.

"Navigating that won't be easy," said Stuart Joyner, an energy specialist at research firm Redburn. "This will be the most important yardstick for this new management team."

BP plans to allocate $15 billion to $17 billion a year on capital expenditures, but a large chunk of those funds would go toward oil-and-gas projects, Mr. Joyner said.

Mr. Looney is expected to lay out his aims soon after he takes the reins, a BP spokesman said.

Due to the complexity of the industry, oil companies tend to hire internal candidates for key roles, said Pavel Molchanov, a director at brokerage Raymond James & Associates. "BP usually has long-serving CEOs and long-serving CFOs," Mr. Molchanov said.

As CFO, Mr. Auchincloss is entitled to an annual base salary of GBP695,000 ($906,985), a cash allowance and other compensation, BP said in a filing with regulators.

Write to Nina Trentmann at [e-mail]

(END) Dow Jones Newswires

January 21, 2020 17:36 ET (22:36 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.