BP has discovered the largest oil and gas field in 25 years. This is the fruit of a new strategy

British BP announced the discovery of a giant oil and gas field off the coast of Brazil - the largest for the company in the last quarter of a century. The discovery came in handy: the next day, the troubled supermajor will report quarterly earnings.

The new Boomerang field is located in an oil and gas area near Rio de Janeiro and covers an area of more than 300 square kilometers. It is BP's largest hydrocarbon discovery in 25 years, the company said, citing oil division head Gordon Birrell. The previous comparable discovery was in 1999, when the Shah Deniz gas field was discovered offshore in the Caspian Sea near Baku, a BP spokesman told the Financial Times.

The company did not disclose the volume of Boomerang reserves, nor their quality, and also warned about the increased content of carbon dioxide, which can complicate production and increase costs. Nevertheless, BP shares in London at the opening of trading reacted to the news with a 1.7% rise, while the company's securities at the New York premarket added almost 2%. Investors may have been given additional cause for optimism by a leak in the FT that the activist fund Elliott Management demanded that BP's new management double its cost-cutting plan.

BP is now being forced to return to its roots. Five years ago, Bernard Looney, who headed it at the time, promised to cut oil and gas production by 40% in favor of renewable energy by 2030. But the company's massive investment in green energy has resulted in the company returning half as much profit to shareholders as Shell and four times less than Exxon, as noted by the BBC. 

Under pressure from investors, BP's new CEO Murray Auchincloss changed strategy: the company is now back to betting on oil and gas, while reducing its focus on renewable energy. In February 2025, Auchincloss announced that BP would invest $10 billion annually - 20% more than planned - to accelerate exploration and ramp up production. At the same time, the company reneged on a commitment to limit exploration geography and reduce fossil fuel production as part of the energy transition.

American hedge fund Elliott Management, which owns a 5% stake in BP, insists that the company should focus on savings and provide $20 billion of free cash flow by 2027. In February, BP's chief executive promised to cut costs by $4-5 billion, but Elliott is now demanding that another $5 billion be added to that figure, a source told the FT. Elliott considers BP's entire back office to be bloated and points to "tens of thousands" of employees worldwide, he said. BP is due to report on its cost-cutting program on August 5 as part of its publication of last quarter's results.

Not all investors are backing Elliott. BP needs to improve its operating performance, but "cost control is not the main issue," David Cumming, head of UK equity investment at Newton Investment Management, told the FT. Another major investor, who preferred to remain anonymous, spoke to the FT expressing concern that the demand to cut BP's costs by another $5 billion looks overly aggressive and could jeopardize the company's future growth. 

The consensus forecast of stock analysts, which was published by Marketbeat, expects the company to report earnings of $0.62 per share and revenue of $42.88 billion for the last quarter. According to FactSet, BP is the only one of the oil and gas "supermajors" (Total, Shell, Eni, ExxonMobil and Chevron) whose shares Wall Street does not recommend buying.

In June, Wells Fargo reaffirmed its neutral investment rating for BP, in July - Piper Sandler and Scotiabank. Among the pessimists is Morgan Stanley, which in May downgraded the company's rating from neutral to "below market," in line with its recommendation to sell the stock.

This article was AI-translated and verified by a human editor