Shares in BP rose by 7% to their highest since August in early trade on Monday, after investor Elliott Management built a stake in the energy major it is expected to use to press for change in strategy and to the board.
By 0901 GMT, the shares were up about 7% to 462.85 pence, on track for their biggest daily gain since February 2023.
Last year BP shares fell by almost 16% compared with other energy majors Shell, which fell nearly 4%, and ExxonMobil, which rose 8%.
BP and Elliott have declined to comment.
"Given BP's underperformance versus peers... we think any activist would call for a change in the chairperson at the very least," RBC Capital Markets analyst Biraj Borkhataria said.
BP CEO Murray Auchincloss has been trying to restore investor confidence in the company's strategy and following the resignation of his predecessor Bernard Looney in September 2023 for failing to disclose relationships with employees.
"In terms of strategic business reviews, we would expect a push to effectively split up the core oil and gas segment to some of BP's transition growth engines, in order to help minimise capital into these areas," Borkhataria said.
BP, set to report its fourth-quarter earnings on Tuesday, last month warned of weaker results.
It also delayed its investor day to February 26 from February 11 because Auchincloss needed a medical procedure.
Auchincloss is expected to use the capital markets day (CMD) to announce his new strategy.
Since taking office in January last year, he has slowed investments in renewables and low-carbon energy and focused on higher-return oil and gas projects.
"Reports of Elliott taking an activist position in BP emerge at an interesting time with its CMD only two weeks out. Management was already under pressure into this event—this development, if true, adds to it," brokerage TD Cowen analysts said.
Elliott has become one of the most influential activist investors with about $70 billion in assets.
"Given Elliott's track record, we believe its involvement could lead to board changes (for BP), portfolio rationalisation, and capex prioritisation on upstream projects, aiming to maximise free cash flow generation," Jefferies analyst Giacomo Romeo said.
A source familiar with the matter told Reuters on Saturday Elliott had built a stake without disclosing its size.
Bloomberg News earlier reported U.S.-based Elliott was seeking to boost shareholder value by urging BP to consider transformative measures and called Elliott's stake in the company "significant".
(Reuters - Reporting by Samuel Indyk and Arunima Kumar; Editing by Amanda Cooper and Barbara Lewis)