Oberon Houston, Oil & Gas Investment Banking

BP does not need another reset. It needs to prove what its assets are worth.

The market is not saying that BP lacks quality in the portfolio. It is saying that the quality is not being fully recognised inside the current corporate structure. That is why BP’s problem is no longer only strategic. It is structural.

The valuation gap reflects a loss of confidence in the group wrapper: strategy, governance, capital allocation and execution. Many investors I speak to believe BP owns attractive assets. They are far less convinced that BP is still the best owner of them.

The hawks simply want BP to be acquired and be done with it. But there is another route: BP can stay independent, while restructuring itself so radically that the market has no choice but to value its best assets properly.

What BP cannot do is ask shareholders to wait indefinitely for another management reset to be believed. It has made too many poor strategic decisions to recover credibility through words alone.

BP’s latest strategic turn — away from the more ambitious transition narrative and back toward higher-return oil and gas investment, cost reduction, disposals and capital discipline — was, to some, directionally sensible; to others, merely an acknowledgement of what had always been obvious. It recognised what many shareholders had concluded some time ago: BP had gone too far in asking investors to value a hybrid transition company when its highest-returning businesses remained in hydrocarbons.

But the reset still leaves BP intact. It asks the market to believe that the same corporate wrapper responsible for the discount can now close it. Investors may agree with the direction of travel and still conclude that it is not enough.

The discount did not appear by accident. It was earned steadily over time. BP asked investors to believe in a strategy that moved the company away from the businesses where it had the clearest competitive advantage, before later asking them to believe it could move back again. It spent years trying to persuade the market that it could be both a major oil and gas company and a broad energy-transition platform. That may have suited the politics of the moment, but it badly damaged the investment case.

The result was not simply a lower multiple. It was a loss of trust. Investors began to doubt the consistency of the strategy, the discipline of capital allocation and the willingness of the board to prioritise shareholder value over narrative.

That is why the reset has not been enough. It reverses some of the language and some of the capital allocation, but it does not erase the history. A market that has been asked to believe too many different versions of BP is unlikely to accept the latest version on words alone.

A discounted conglomerate does not rerate simply because management says it will become more focused. It rerates when the market can see, price and own the assets more clearly.

Commentators have also considered whether BP, like other large London-listed companies, might be better understood and better valued in New York. The question became harder to ignore when BP appointed Albert Manifold as chair. He had overseen the move of CRH’s primary listing to the United States, one of the clearest examples of a major London-listed company choosing New York as its natural equity home.

It is impossible to know whether BP appointed Manifold with a US listing explicitly in mind. His departure, so soon after his appointment, is itself another sign of the disorder around the company. But the signal was difficult to miss: BP had brought into the chair a man who had already taken one major London-listed company across the Atlantic.

A US listing would help by placing BP closer to the world’s deepest energy capital market, encouraging comparison with ExxonMobil and Chevron, and reducing some of the London-market discount. But it would not solve the fundamental problem.

The risk is that BP moves the shop window while leaving the business unchanged. It would still be a UK-domiciled, globally diversified, politically exposed, integrated major with a complicated history and a mixed asset base. It might gain a better audience, but it would not necessarily answer the deeper question: whether the assets are worth more outside the current structure than inside it.

There are also practical issues. A US primary listing could risk the loss of some UK index demand. US index inclusion would not be automatic. Political criticism in the UK would be intense. And US investors may still value BP as a weaker European major if the underlying company remains the same.

That is why the better answer is not simply to move BP plc to New York. The better answer is to create a business that actually belongs there.

To her credit, Meg O’Neill’s reorganisation moves in the right direction. BP’s return to a simpler upstream-and-downstream structure is sensible. It dismantles some of the organisational complexity created during the previous transition era and gives investors a clearer way to judge performance.

That matters because BP’s problem is not only one of strategy. It is also one of accountability. For too long, investors have struggled to understand where value was being created, where capital was being consumed, and whether the group’s different businesses were genuinely reinforcing each other or merely sitting together under the same corporate roof.

A clearer structure should make BP easier to manage and easier to measure. It should make capital allocation more transparent. It should allow shareholders to distinguish between businesses that are earning their place inside the group and businesses that might be worth more elsewhere.

In that sense, the reorganisation is a useful first step. But it should be seen as the beginning of the value-unlock process, not the end of it. The real test is whether BP is willing to use the new structure to make harder choices. If the reset is to mean anything, it cannot stop at clearer reporting lines. It must lead to clearer ownership logic.

The most logical first move would be to spin off BP’s Americas upstream platform and list it in New York.

That vehicle should include BP’s Lower 48 onshore business, bpx Energy, and its deepwater Gulf business. It could also include, if the logic is agreed, BP’s Trinidad upstream gas and related LNG interests. That is a tactical question, however: whether the spin-off should be a pure North American upstream company or a broader Atlantic Basin upstream and LNG company. The key point is to agree the strategic logic first. The exact perimeter is then a matter of execution.

The industrial logic is strong. The Lower 48 gives the company unconventional oil and gas exposure in basins US investors already understand. The Gulf brings long-cycle deepwater barrels, operated infrastructure and material development optionality. If included, Trinidad would add upstream gas, LNG feedstock and Atlantic Basin export relevance.

This should not be presented as financial engineering. It should be presented as a capital-market correction.

BP’s Americas business would be dollar-denominated, operationally legible to US investors, and directly comparable with companies and assets that the New York market already understands. US investors know how to value shale inventory, decline rates, Gulf of Mexico hubs, reserve replacement, lifting costs, capital intensity, free cash flow yield, LNG exposure and shareholder distributions.

These assets do not need to be buried inside a European integrated major to be understood. They need to be made visible.

A newly listed, independent Americas upstream company would force the market to answer a question BP has so far failed to answer convincingly: what are these assets actually worth?

Inside BP, the Americas business is absorbed into a group multiple that reflects everything else: the legacy of strategic inconsistency, UK political risk, European energy-transition expectations, downstream cyclicality, corporate overhead, capital-allocation scepticism and the general malaise of London-listed equities. Outside BP, the business could be valued on its own merits.

That is the point. BP shareholders should not be asked to accept management’s assertion that good assets are hidden inside the group. They should be given direct exposure to those assets and allowed to see what the market will pay for them.

The advantage of O’Neill’s reorganisation is that BP does not need to start from a blank sheet of paper. A clearer upstream division gives the company the internal architecture to prepare the Americas business for separation: separate management accounts, allocate capital directly, define the relationship with trading and LNG marketing, clarify reserves and production disclosure, isolate overhead, clean up intercompany arrangements, and prepare the asset base for public-market scrutiny. That makes the spin-off a logical extension of the reorganisation, rather than a rejection of it.

The value-unlock mechanism is straightforward. Today, shareholders own the Americas business through a discounted BP share price. After a spin-off, they would own shares in two companies: a more focused residual BP and a pure-play New York-listed Americas upstream company.

If the spun company trades at a better multiple than the value currently implied inside BP, value is created. If strategic buyers later pay a premium for it, value is crystallised further. A spin-off is not the opposite of a sale. It may be the most intelligent way to stage one.

Once separated and listed in New York, the Americas business would have strategic optionality. It would be fully independent, consolidate additional assets, merge with a large-cap independent, or become a target for a strategic buyer with basin overlap and operating synergies.

Strategic buyers pay premia where they can create value that the current owner cannot. The Americas business may be worth one number inside BP and another number in the hands of a buyer that can combine infrastructure, acreage, operating teams, procurement, tax attributes, LNG portfolio needs or reserve replacement requirements.

That is why a break-up thesis is cleaner than a simple listing thesis. A relisting asks investors to rerate the whole company. A separation creates price discovery. It lets the market and potential buyers put hard numbers on assets that are currently obscured by the group structure.

The objection is obvious: why would BP willingly separate assets that may be among its best?

The answer is that quality trapped inside a discounted structure is not enough. If the market refuses to capitalise those assets properly inside BP, then keeping them inside the group becomes an act of faith rather than an act of value creation.

The board’s duty is not to preserve the largest possible BP. It is to maximise value for BP shareholders.

An Americas spin-off would be a much harder signal than another reset. It would say that BP is prepared to self-disrupt, but in a disciplined way: first simplify the company, then create transparent asset-level performance, then separate the assets whose value is most clearly trapped inside the group multiple.

There is also a political advantage. A full move of BP’s primary listing to New York would be highly symbolic and politically explosive. A spin-off of the Americas business is different. It can be presented as industrial logic rather than national rejection. BP plc could remain London-listed while allowing the Americas business to find its own shareholder base.

The residual BP would then face the next question: what is left, and what is it for?

After an Americas upstream separation, BP would still have international upstream, trading, downstream, retail, refining, remaining LNG interests and transition-related businesses. The first spin-off would not answer every question. It would make the remaining questions unavoidable: which businesses genuinely belong together, which should be sold, and which are worth more in the hands of different owners?

But the Americas spin is the right first move because it is the cleanest test case. It has obvious geographic logic, investor logic and strategic-buyer logic. It is more surgical than selling BP whole and more substantive than shifting the listing of BP plc.

The alternative is to wait for the current reset to work. That may be possible, but it requires investors to believe that BP can out-execute its own history. It requires the market to accept that the company which lost credibility through strategic overreach can regain it through a revised plan. It requires patience from shareholders who have already watched BP underperform the US majors and struggle to define what kind of company it wants to be.

That is a lot to ask.

The central question is no longer whether BP owns attractive assets. The central question is whether BP is the best owner of all of them. If the answer is yes, management should prove it through returns, cash flow and a narrowing valuation gap. If the answer is no, the board should act before someone else forces the issue.

BP does not need another slogan. It needs a transaction that changes the facts.

A New York listing for the whole group may still have a place in the debate. But the stronger move is to put the Americas business where it belongs: in a standalone company, listed in New York, valued by the investors who best understand it, and available — at the right price — to the strategic buyers who can extract the most value.

That would be a real reset.

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