Shares in BP plummeted in early trading on Tuesday after the oil and gas giant announced a suspension of its share buyback programme and an increase in its cost-cutting goals. The moves are part of a broader strategic reset as the company grapples with investor pressure and a weaker outlook for oil prices.
Strategic Pivot Under Scrutiny
In its final results, BP stated that the decisions were made to allow greater investment in its oil production business and to "fully allocate excess cash" to strengthening its balance sheet. This marks a significant reversal from the aggressive push into green energy initiated in 2020 under former chief executive Bernard Looney.
That high-profile strategy aimed to cut oil production by 40 per cent, boost low-carbon investment, and achieve net zero status by 2050. While BP maintains its net zero ambition, it has eliminated the oil production reduction target and slashed its renewable energy budget following dissatisfaction from investors over profits and share performance.
Market Reaction and Analyst Insight
The group's share price dropped 4.1 per cent to 458 pence in early morning trading following the announcement. Ashley Kelty, an analyst at Panmure Liberum, commented: "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."
Kelty added that the halt suggests both chairman Albert Manifold and incoming chief executive Meg O'Neill are "keen to pause and take stock of what BP has and to allocate capital accordingly." He noted, "The bloated cost base is an obvious target, but the clearing out of the Looney/Auchincloss acolytes is likely to be a 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 oil and gas business."
Financial Performance Details
BP reported adjusted profits of $1.5 billion for the fourth quarter, a 31.8 per cent decline from the previous quarter but in line with analyst expectations of $1.53 billion. Net debt remained broadly unchanged at $22.2 billion, despite pledges to reduce borrowing and generate $5 billion from asset sales.
Full-year profits fell 15.7 per cent to $7.5 billion, down from $8.9 billion in 2024, amid a roughly 20 per cent drop in crude oil prices. The group increased its cost-cutting target by $1.5 billion, aiming to deliver savings between $5.5 billion and $6.5 billion by the end of 2027.
Capital Expenditure and Leadership Changes
BP's capital expenditure budget for 2026 is set between $13 billion and $13.5 billion, with expected divestment proceeds of roughly $9 billion to $10 billion. The dividend per ordinary share was maintained at 8.3 cents.
The final quarter capped off a tumultuous year for BP, which began with activist investor Elliott Investment Management pushing for a strategic shift away from heavy renewable spending toward increased fossil fuel investment. This involvement came after BP's share price began to significantly lag behind competitors like Shell and Chevron.
Chairman Albert Manifold ousted Murray Auchincloss from the top job, with Meg O'Neill selected to take the helm. The chief executive of Woodside Energy Group, known for championing fossil fuels, will assume the role this April, suggesting an acceleration of the group's transition away from clean energy projects.
