BP shares slide as suspends share buybacks and increases cost-cutting goal
Energy giant BP has suspended its share buyback programme and deepened its cost-cutting target, as it scrambles to bolster its balance sheet amid the anticipation of a weaker oil price.
In its final results, the company said the decisions were taken to allow it invest in its oil production business and “fully allocate excess cash” to its balance sheet, as it works to reverse its aggressive push into green energy.
The high profile pivot began in 2020, under former chief executive Bernard Looney, aiming to cut oil production by 40 per cent, increase low-carbon investment and become a net zero company by 2050.
While the group has maintained its ambition to become net zero, it has been forced to reset, eliminating its oil production reduction goal and slashing its renewable energy budget, after coming under pressure from investors who were unhappy with both profits and share price.
The group’s share price plummeted 4.1 per cent to 458 pence in early morning trading, following its decision to halt the programme.
Ashley Kelty, analyst at Panmure Liberum, said: “Investors [are] unlikely to be happy about the suspension of the buyback and shares likely to get battered today. However, we expect this is a temporary hiatus and that buybacks may resume in the near term.”
Profits in line with expectations
The group reported adjusted profits of $1.5bn in the fourth quarter, a 31.8 per cent decline from the prior quarter, but in line with analyst expectations of $1.53bn.
Net debt remained broadly unchanged from last year, standing at $22.2bn, despite its pledge to reduce borrowing and generate $5bn from asset sales.
Full year profits fell 15.7 per cent to $7.5bn, down from $8.9bn recorded in 2024, amid the price of crude oil dropping by roughly 20 per cent.
The group also increased it cost cutting target by $1.5bn, aiming to deliver cuts between $5.5bn and $6.5bn by the end of 2027.
Its capital expenditure budget for 2026 is between $13bn to $13.5bn, with expected divestment proceeds of roughly $9bn to $10bn.
Divided per ordinary share was maintained at 8.3 cents.
Capping off rocky year
The final quarter brought to an end a tumultuous year for BP, which begun with activist investor Elliott Investment Management pushing for major strategic shifts away from heavy renewable spending to increased fossil fuel investment.
The investor got involved after BP’s share price began to significantly lag behind that of competitors Shell and Chevron.
Chairman Albert Manifold ousted Murray Auchincloss from the top job, with Meg O’Neill picked to take the helm.
The chief executive of Woodside Energy Group will take over this April, with her track record of championing fossil fuels suggesting she will speed up the group’s transition away from clean energy projects.
Kelty noted that the halt of the programme suggests both Manifold and O’Neill are “keen to pause and take stock of what BP has and to allocate capital accordingly.
He said: “The bloated cost base is an obvious target, but the clearing out of the Looney/Auchinloss acolytes is likely to be near-term objective.
“We would estimate that the low margin renewables strategy will be consigned to the dustbin of history with a return to focus on core O&G business.”