Business

BP's strategic shift reflects the new reality since Vladimir Putins military attack on Ukraine

BP Plc said it will cut oil and gas output more slowly this decade after the supply disruption caused by Russias invasion of Ukraine boosted prices and delivered record profits.

While the British company said it was doubling down on the transition to cleaner energy with an additional $8 billion of spending to 2030, it will ramp up investments into fossil fuels by the same amount. By the start of the next decade, the company will have higher emissions than previously promised, with oil and gas output down by 25% compared to 2019, compared with its old target for a drop of as much as 40%.

The strategic shift reflects the new reality since President Vladimir Putins military attack on Ukraine, and his use of energy supplies as a weapon against Europe. After years of criticism for their role in causing climate change, oil and gas companies now face calls from governments around the world to boost production.

Were going to invest more into todays energy system, BP Chief Executive Officer Bernard Looney said in an interview on Tuesday. And that, of course, is a hydrocarbon system.

BP isnt alone in adjusting its long-term strategy. Last week, Shell Plc, which also has a goal to reach net-zero emissions by 2050, said it would expand its natural gas business while holding investment steady this year in its renewables unit.

More oil and gas will necessarily mean more carbon emissions, despite the growing urgency to curb planet-warming gases and limit the worst impacts of climate change. Earlier this year, BPs own economists said the worlds carbon budget is running out. The company now aims to cut the carbon from oil and gas its produces know as Scope 3 emissions by 20% to 30% in 2030, down from a previous ambition of as much as a 40% cut. It still it aims to cut its own direct emissions known as Scope 1 and Scope 2 by 50% by 2030.

In a strategy update published alongside fourth-quarter earnings, in which BP announced a record 2022 profit of $27.65 billion, the company said it will boost spending in both its fossil fuel and low-carbon businesses. It plans additional investment of as much as $8 billion in each segment by the end of the decade.

For oil and gas, BP will target its spending to boost production as quickly as possible. That would mean investments such as added drilling capacity in the Gulf of Mexico, the North Sea and the Permian shale formation in the US.

This is about production that can be brought on over the near- to medium-term to help people with the supply issues that theyre facing, Looney said.

Oil Supercycle

The perceived lack of supply in the oil market is also driving up BPs view of prices. The company expects crude to average $70 a barrel in 2030, up from the $60 it predicted less than a year ago.

Its outlook has moved in line with our oil supercycle view, Christyan Malek, global head of energy strategy at JPMorgan Chase & Co., wrote in a note.

While BP has changed the pace of its transition to clean energy, it says it still funneling a growing share of the cash from its fossil fuel business into low-carbon investments. In 2019, the company spent 3% of its capital in areas other than oil and gas. Last year that rose to 30% and will be more than half in 2030, Looney said.

BP stuck to its goal of developing 50 gigawatts of renewable power by 2030 and to be a leader in offshore wind, despite it delivering the lowest returns among its low-carbon priorities. The company said it targets un-levered returns from renewables of 6% to 8%. That compares with more than 15% from bioenergy as well as convenience and electric-vehicle charging, and double-digit returns from hydrogen.

BP shares rose as much as 4.3% on Tuesday as investors welcomed more generous dividends and share buybacks. Yet the company also come under fire for its fossil fuel plans.

Apparently, BP sees the windfall profits not as an opportunity to invest more in renewables, but as an encouragement to keep investing in fossil fuels, said Mark van Baal, founder of activist shareholder group Follow This. The company doesnt have a target to slash its total CO2 emissions this decade.

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Divorce can have a surprisingly positive effect on performance at work, study finds

The stress of going through a divorce has been ranked as almost equivalent to experiencing the death of a close friend or family member. So of course its going to impact how you perform at work.

But for some people, that impact is actually positive, according to a new study.

A new report, which is due to be published in scientific journal Personnel Psychology, analyzed the experiences of 542 people who were currently married or cohabitating, long divorced, recently divorced, or currently in the divorce process.

Of those currently in the process of divorce, 44% said divorce had negatively impacted their career. More surprisingly, however, more than a third (39%) said that it had positively impacted their performance at work.

Those respondents who reported a positive impact said that they were more engaged at their job and more satisfied with their own performance. For them, divorce freed up time and energy, and even amplified motivation for work, the report said.

The results of the study could have implications across a large swathe of U.S. society. More than a third of Americans aged 25 to 65 have either divorced or are currently in the process, the study says. In 2021, there were 690,000 divorces or annulments in the U.S, according to the Center for Disease Control and Prevention.

How can divorce be positive?

There is a societal assumption that divorce is always negative, said Connie Wanberg, a co-author on the study and professor at the University of Minnesota researching peoples experiences in the workplace.

Some of these individuals had been in very dysfunctional relationships, and getting away from that relationship allowed them to have a new outlook on life. Some people decided to renew their focus on work and focus on advancement.

Reflecting Wanbergs comments, one respondent in the study said, Prior to the divorce, I spent a lot of time and energy trying to maintain and fix the relationship and that took away from work.

Another person said: Due to the pressure being gone from the degrading relationship, Ive been able to have a clear mind for work.

Wanberg acknowledged that divorce does make life incredibly difficult: You have to move or navigate division of belongings, she said. You have to tell friends and family. You have to visit a lawyer, sometimes multiple times. These can all impact your feelings at work.

Despite this, however, for some people these are all overweighed by the benefits of getting away from a bad relationship.

While divorce is a common and impactful life event, the study states says very little research has been done in relation to how it affects the individual at work on a psychological level and more broadlyinstead, it says, previous reports have disproportionately focused on the effect on hours, wages and disability leave.

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Checkout.com's CFO will become president and COO with a plan to disrupt payments in the U.S.and take on Stripe

I think 2023 is definitely going to be about payments efficiency and acceptance rates and optimization for the bottom line, Céline Dufétel of Checkout.com, a London-based online payments company, told me.

Dufétel was promoted from CFO to president of the company last week; shell retain her COO function. She is based in New York and leading the expansion into the U.S. to become a disruptor of legacy systems in the payments industry. Checkout.com plans to take on fintech competitors like Stripe. But meeting a challenge isnt something new to Dufétel. While studying applied mathematics, economics, and finance at the École Polytechnique in Palaiseau, France, she served in the French navy and was the only woman serving on a 200-person oil tanker.

Checkout.coms Céline Dufétel.

Courtesy of Dufétel

Some of Checkout.coms global customers include Sony, Alibaba, and the crypto exchange company Binance. In the U.S., Checkout.com has launched a partnership with GE HealthCare to standardize its global payments. Through a single API integration, the company can accept payments across all of its key markets, offering the local payment methods, according to Checkout.com.

GE HealthCare is an independent company following its recent spin-off from General Electric. The digital layer is becoming more and more important in our industry, GE HealthCare CFO Helmut Zodl told me in December.

Dufétel, who joined Checkout.com in August 2021, will keep the COO responsibilities under her umbrella, including all operational and go-to-market teams (like finance and marketing). While in her previous postas COO and CFO of T. Rowe Priceshe earned a spot on Fortunes 2020 40 Under 40 list. Nirupam Sinha, SVP of corporate finance and strategy at Checkout.com, was promoted to CFO. Sinha, joined the company in November 2021, also coming from T. Rowe Price.

But fintechs have cooled off somewhat, at least in the eyes of investors. In early 2022, Checkout.com announced it raised $1 billion in its Series D funding round at a valuation of $40 billion. By the end of the year, the company reduced its internal tax valuation to around $11 billion. Similarly, Stripe, which was valued by private investors at $95 billion in 2021, cut the internal value of its shares by 28% in July.

When you compare us to Stripe, the common point is both provide end-to-end proprietary technology, where youve got direct integration into local payment methods, as opposed to legacy incumbents that have been cobbled together through M&A, Dufétel explains. And that has created a very disjointed experience for merchants, she says. But thats where the similarities end, as Checkout.com is focused on enterprise merchants, and Stripe has its roots in the SMB [small and midsize business] world, Dufétel says.

In this macroenvironment, Checkout.com is providing services we really think a CFO or a chief product officer needs right now, Dufétel says. An example? We give you much more transparency into the fees and help you remediate any declines, she explains. And the company engages with merchants to proactively help them optimize their payments, she says. If you think about very sophisticated, large enterprise clients, thats the kind of white-glove service that theyre looking for, Dufétel says.

Payment services provider Stripe is being watched closely at the moment. Its reportedly in talks to raise new funding at a steep discount from its last valuation, Fortune reported. However, leadership change is on the horizon. Dhivya Suryadevara, CFO at Stripe since 2020, announced Feb. 2 in a LinkedIn post that she will step away from her role at the company to attend to family matters. As is the case with many tech companies, Stripe announced a round of layoffs in November, about 14% of its workforce.

Checkout.com has been building the marketing, sales, and customer success teams in the New York office, Dufétel says. Along with Dufétel, part of the finance, legal, and HR teams are also represented. It takes time to hire and to train people, so its part of the multi-year effort, she says.

In her new role, Dufétel is looking forward to continuing to drive growth for Checkout.com. She no longer wears a CFO hat, but her finance know-how is a mainstay.

See you tomorrow.

Sheryl Estrada
This email address is being protected from spambots. You need JavaScript enabled to view it.

Big deal

Paychex, which provides HR and payroll solutions, surveyed 825 employees and found that 80% regretted leaving their job during the Great Resignation. A separate survey of 354 gauged how employers feel about rehiring job-hoppers. Forty-three percent of respondents said they're willing to rehire employees who left during the Great Resignation, 30% said they wouldn't rehire employees, and 27% said they already have, according to the report. The top benefit returning employees received was remote work, followed by flexible scheduling and bonus incentives.

Going deeper

"Too Many Managers: The Strategic Use of Titles to Avoid Overtime Payments," a new report released by the National Bureau of Economic Research noted that companies frequently give employees managerial titles to avoid paying overtime wages. For example, managerial positions such as "directors of first impression, whose jobs are equal to non-managerial employees, and in this case, a front desk assistant, according to researchers from Harvard and the University of Texas.

Leaderboard

Leigh Burnside was named CFO at Little Caesars, a global family-owned pizza chain. Burnside joins Little Caesars with 30 years of experience in the accounting and finance industry. Most recently, she served as SVP, chief accounting officer, and CFO U.S. at The Wendy's Company. Burnside will replace outgoing CFO Darrell Snygg, who recently retired after 34 years at the company. Burnside will work with the newly named SVP of accounting, Allison Bieri. Little Caesars will also add several new leadership roles in finance and accounting, as well as across the organization, to support recent international and domestic growth.

Jason Godley was named CFO at Xactly, a provider of cloud-based, incentive compensation software. Godley brings over 25 years of financial industry experience to his new role. Godley most recently served as president and CFO at Booster and previously served as the CFO of both IO Data Centers (acquired by Iron Mountain) and Fastaff Travel Nursing. He has also spent time as an investment banker at Citi and Jefferies, where he advised software and enterprise technology companies on capital markets and M&A transactions.

Overheard

"Im worried about me, too."

Elon Musk, CEO of SpaceX, Tesla, and Twitter, wrote in response to a Twitter user on Sunday who told him to take care of himself. Musk is starting to show signs of wear and tear from running three major companies simultaneously. Musk, whom a jury just found not liable for damages over his funding secured tweet, said on Twitter that the last three months had been extremely challenging, Fortune reported.

EY: 97% of CEOs have changed their investment strategy in response to geopolitical challengesand almost a third already halted a project

Anyone talking to CEOs will spot the issue that is currently top of their mind: shifts in the levels of global cooperation and how they will impact trade, investment, and growth.

Fears about the direction of globalization are not new. However, these fears have finally become codified in hard policy.

In 2022 two significant pieces of legislation by the U.S. government, the Creating Helpful Incentives to Produce Semiconductors and Science Act and the Inflation Reduction Act, ushered in a new era where geopolitics shape corporate strategies. In this transformed global operating environment, geopolitical dynamics play an increasingly important role in business decisions.

CEOs seem ready to seize this challenge and lead from the front. Almost all 1,200 CEOs (97%) surveyed in the latest quarterly EY CEO Outlook Pulse have altered their planned investment strategies in response to these challenges, with almost a third (32%) halting a planned investment. Others are choosing to adapt supply chains, relocate operational assets, and even exit particular markets.

For the first time in three years, restrictive regulatory, trade, and investment policies have supplanted ongoing COVID-19-related issues as the key reason for altering international investment plans, with 28% citing it as their main driver.

CEOs are examining their global footprint, operations, assets, and addressable markets through the geopolitical lens. CEOs are looking deeply into their value chains and positioning to navigate the increasing barriers that governments are raising.

They are doing this from both a risk management anglein case they can no longer trade with a particular countrywhile also seeking opportunities to assess levels of support or barriers to doing business if they choose to relocate to one country over another. They are correctly weighing risk and reward and positioning their companies to create maximum optionality and drive faster growth.

These shifts are also impacting cross-border mergers and acquisitions (M&A). The average share of deal value allocated to cross-border deals in 2022 was just 25%. For the decade prior to 2022, it was 30%. The figure for the years 2007-2011, the height of the current phase of globalization, it was 34%.

One key characteristic of planned transactions in 2023 is friendshoring, with CEO investment plans aligning with geopolitical considerations. Most CEOs (78%) will look to conduct M&A in countries geopolitically and economically aligned with their home country. Of those planning an acquisition in the next 12 months, less than one in 10 will now consider acquiring in a market where their home country does not have a strong geopolitical and economic relationship.

The biggest reversal in M&A flows has been between China and the U.S. and Europe. In 2016, Chinese investors acquired assets valued at $135 billion in these areas. In 2022 it was just $8 billion. With the increased oversight and intervention being put in place by governments, especially with regard to Chinese companies buying assets overseas, it is hard to see these flows returning to the levels seen at the height of the phase of globalization any time soon.

CEOs and boards cannot wait for clarity before setting their future strategy. Political risk analysis is a critical part of todays strategic planningnot least in judging current and future geographical footprint risks and opportunities, such as tax credits. By taking bold action now, CEOs can make strategic investment and operational decisions across their markets, business models, and supply chains that will position their company to grow during the likely turbulent times ahead.

Andrea Guerzoni is EYs global vice chair of strategy and transactions.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

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Boeing cuts desk 2,000 jobs and outsources work

Boeing plans to make staffing cuts in the aerospace companys finance and human resources departments in 2023, with a loss of around 2,000 jobs, the company said.

We expect about 2,000 reductions primarily in Finance and HR through a combination of attrition and layoffs, Boeing said in a statement Monday. While no one has been notified of job loss, we will continue to share information transparently to allow people to plan.

The company, which recently relocated its headquarters to Arlington, Virginia, said it expects to significantly grow the overall workforce during the year. We grew Boeings workforce by 15,000 last year and plan to hire another 10,000 employees this year with a focus on engineering and manufacturing, the statement said.

Boeings total workforce was 156,000 employees as of Dec. 31, 2022, the company said.

The Seattle Times reported Boeing, which has been one of the largest private employers in Washington state, plans to outsource about a third of the eliminated positions to Tata Consulting Services in Bengaluru, India.

Mike Friedman, a senior director of communications, told the Times the other positions will be eliminated as the company makes reductions in finance and human resources support services.

Over time, some of our corporate functions have grown quite large. And with that growth tends to come bureaucracy or disparate systems that are inefficient, Friedman said. So were streamlining.

The Times reported about 1,500 of the companys approximately 5,800 finance positions will be cut, with up to 400 more job cuts in human resources, which is about 15% of the departments total staff.

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Someone in Washington state has a Powerball ticket worth $754.6 million

Someone in Washington state overcame steep odds Monday night to win an estimated $747 million Powerball jackpot.

The winning numbers were 05, 11, 22, 23, 69 and the Powerball 07.

Lottery officials said in a statement early Tuesday that a single ticket matched all six numbers and was worth $754.6 million.

The full jackpot is for a winner opting for an annuity distributed in one immediate but partial payout followed by additional payments over 29 years that increase by 5% annually. The winner also can opt for a one-time cash payment of $407.2 million.

Both prizes available are the amounts before taxes, Powerball said.

The lottery games website shows the jackpot for the next drawing on Thursday has dropped to $20 million.

Monday nights win was the first Powerball jackpot win since Nov. 19, 2022. That winless streak allowed the prize to grow larger and larger until it stood as the ninth-largest in U.S. history.

Higher interest rates have allowed annuity payments to increase compared with earlier jackpots, when rates were lower. Most winners prefer the immediate cash prize.

The games abysmal odds of 1 in 292.2 million are designed to build big prizes drawing more players. That strategy certainly has worked recently, as someone in Maine won a $1.35 billion Mega Millions prize in January and a California player hit a record $2.04 billion Powerball jackpot last November. No one has claimed either of those prizes.

Powerball is played in 45 states, as well as Washington, D.C., Puerto Rico and the U.S. Virgin Islands.

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'Every Googler' to test ChatGPT competitor: CEO Pichai

Both U.S.-based Alphabet and China-based Baidu publicly announced ChatGPT competitors on Monday as generative A.I. threatens to throw a bombshell into the world of internet search.

In a blog post released Monday, Alphabet CEO Sundar Pichai revealed more details about its own generative A.I. program, called Bard. Pichai said the experimental conversational A.I. service would provide more in-depth answers for questions where theres no one right answer.

Pichai said Bard would be released to trusted testers first, before a launch to the general public in a few weeks time.

In an internal memo sent after the blog post, Pichai said Google would be enlisting every Googler to help shape Bard and contribute through a special company-wide dogfood, reported CNBC. (The term dogfood is a term used in tech companies to refer to employees using their companys own products as if they were end-users.)

Pichai continued that the company would solicit feedback from its employees in the spirit of an internal hackathon.

Google did not immediately respond to a request for comment.

Google reportedly issued a code red after the release of ChatGPT, as the company viewed the program as a serious threat to internet search, its main product. The company has released more A.I. research since the launch of ChatGPT, including MusicLM, a program that can generate music using hummed or whistled melodies or text prompts.

Microsoft, whose Bing search engine competes with Google, is investing $10 billion into ChatGPTs developer OpenAI, and is reportedly working to integrate OpenAis programs into its products.

Baidus Ernie Bot

Just a few hours later, another tech giant on the other side of the world announced its own competitor to ChatGPT.

Chinese tech company Baidu said it was on track to complete testing of its own conversational A.I. bot, named Ernie Bot in English, by March. Much like Google, Baidu is reportedly planning to integrate the bot as part of its search engine, using generative A.I. to compose written answers to search queries.

Shares in Baidu were up 15.6% at 2:40 p.m. Hong Kong time.

Baidu is investing heavily in artificial intelligence to help regain ground lost to its competitors. The company was one of Chinas first successful internet companies, offering search to Chinese users (within the confines of Chinese internet censorship). Yet the company failed to capitalize on the rise of smartphones, losing ground in advertising and video to companies like Alibaba, Tencent and Bytedance.

Baidu CEO Robin Li cited ChatGPT as an example of a technology where the company could overtake its rivals at an internal meeting last December, reports Bloomberg.

Last year, Baidu launched ERNIE-ViLG, an image-generating A.I. similar to programs like Stable Diffusion. Users report the program generates some images, like those including Chinese content, better than its Western counterparts, yet the MIT Technology Review notes ERNIE-ViLG does not generate images of content deemed politically-sensitive.

Baidu is also developing self-driving cars. The company won permission from authorities to test driverless robotaxis in Beijing last December.

OpenAI has yet to make ChatGPT available in mainland China. Still, the program has gone viral in the country, as Chinese internet users find ways to access the app.

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