LONDON-- BP PLC's annual meeting is usually a quiet event. Big
investors stay home, and smaller shareholders show up to raise
sometimes off-topic concerns about things like the maintenance of
BP's shipping fleet before they sit down for a company-provided
lunch--wine included.
But this year, in the midst of a prolonged oil-price crunch,
there is keen investor attention on what energy-industry leaders
have to say---and especially on BP Chief Executive Bob Dudley, who
will face public questions for the first time in more than two
months at Thursday's meeting.
Mr. Dudley is facing a competitive threat from Royal Dutch Shell
PLC--which just offered about $70 billion to buy BG Group PLC in a
deal that would dominate global natural gas markets--along with
questions around BP's turnaround since its 2010 Gulf of Mexico
disaster. BP's board and shareholders are moving toward a new
recognition of how anti-global-warming policies affect the energy
business. And last month a shareholder advisory group recommended
investors vote down Mr. Dudley's $15 million pay package.
This is BP's first annual meeting since oil prices began
nose-diving last summer, falling from $115 a barrel for Brent
crude, the global benchmark to $47, in January. It was trading at
about $60 on Wednesday afternoon, continuing to drag down oil
producers' profits.
"What these companies should say is if the oil price drops
materially, we're in a different situation than a year ago, and to
lay out their strategic plans," said Paul Mumford, an investment
manager at Cavendish Asset Management, which held about $1 million
worth of BP stock as of February.
The pressures on Mr. Dudley are varied.
Among the loudest complaints are those about his pay package.
Shareholders will be asked to vote on a proposal to increase Mr.
Dudley's total compensation to more than $15 million in 2014 from
$14.6 million a year earlier, despite the company's difficulties,
including a money-losing fourth quarter.
Proxy advisory firm Glass Lewis last month said shareholders
should vote against his proposed pay.
"The company's chief executive receives remuneration that
outpaces the remuneration given to chief executives at firms of a
similar size, despite the company's relative underperformance over
the period," Glass Lewis wrote in a March report.
BP said executive pay is closely linked to BP's performance and
was part of a program approved by shareholders. The company said
that most of Mr. Dudley's pay is in shares, which "aligns his
reward with the long-term interests of shareholders."
"Remuneration for 2014 was entirely in line with this policy and
reflected the delivery of BP's strategic targets over the past
three years," the company said in response to questions.
Overall, Mr. Dudley's pay and bonuses jumped by 25% last year
from 2013 to $12.7 million, excluding an additional $2.6 million
increase in the value of the CEO's pension. Glass Lewis says around
13% of voting shareholders voted against BP's executive pay package
last year and 19% abstained, indicating widespread discontent. But
large shareholders have typically not raised the issue about
executive pay at BP, which remains lower than what its counterparts
pay.
Shell Chief Executive Ben van Beurden's total remuneration,
including pension and tax equalization, was $32.16 million last
year. Exxon Mobil Chief Executive Rex Tillerson took home $33.1
million in 2014. And Chevron CEO John Watson took home $26 million
in 2014.
Mr. Dudley faces plenty of other challenges. BP has already
announced plans to slash its capital and exploration budget by 20%
this year following a five-year program of divestments after the
2010 Macondo well blowout, which killed 11 workers in the Gulf of
Mexico. The cuts, some investors say, helped the company prepare
for the oil-price slump.
"BP had a near-death experience with Macondo which forced them
to reassess their strategy," said Chris Watt, the manager of the
Jupiter growth and income fund at Jupiter Asset Management Ltd.,
which held more than $520 million in BP shares in February. "That's
why I like BP; I feel they're further down the road than others
because they've had this massive shock."
But the cuts could hurt its ability to strengthen itself for the
future. BP's production last year was down in 2014, and the company
last year only found enough resources to replace 63% of the oil and
gas it pumped. And the company says that it has been approving new
oil-and-gas projects that would be profitable at $80 per
barrel--about 30% more than the oil price this week.
BP's competitive landscape shifted last week with Royal Dutch
Shell PLC's bid for BG Group PLC. The tie-up would make Shell a
dominant shipper of liquefied natural gas, a market in which BP is
also active. Investors and analysts say they don't expect BP to
make a similar acquisition, as the company is still dealing with
uncertainty over how much it will pay out in damages of the Gulf
spill.
In a new development, BP management said it would support
shareholder proposals to quantify and disclose risks stemming from
initiatives to stem carbon emissions. BP's board, like Shell's, has
approved resolutions calling for disclosure of climate-related
risks. The sovereign-wealth fund of Norway, a major oil-producing
state, said Wednesday that it would vote in favor of the
proposals.
Write to Sarah Kent at sarah.kent@wsj.com and Justin Scheck at
justin.scheck@wsj.com
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