BP has suspended its share buyback program and ramped up cost-cutting targets after reporting sharply lower profits for 2025. The FTSE 100 oil giant's underlying replacement cost profits fell 16% to 7.49 billion US dollars (£5.47 billion), down from 8.92 billion dollars in 2024. The strategic shift comes as oil prices dropped below 60 dollars a barrel for the first time in nearly five years, putting pressure on the energy company's balance sheet.
The company's shares fell 4% in morning trading on Tuesday as investors digested the results. Fourth-quarter earnings stood at 1.54 billion dollars, a 30% drop quarter-on-quarter, though 32% higher than a year earlier.
Strategic Reset
BP is taking decisive action to strengthen its financial position. The company increased its cost savings target to 5.5 billion to 6.5 billion dollars by the end of next year, up from the previous target of up to 5 billion dollars. Capital expenditure for 2026 will be reduced to the lower end of the guidance range.
The oil major is executing a 20 billion dollar disposal program. Proceeds from the sale of a majority stake in its Castrol lubricants business, announced in December, are expected to bring in around 6 billion dollars.
Leadership Transition
The results come amid a period of turmoil for BP. Chief executive Murray Auchincloss stepped down after less than two years in the role. Meg O'Neill, boss of Woodside Energy, will replace him on April 1. The company also faced pressure from activist investor Elliott Investment Management.
Carol Howle, serving as interim leader, said: «We have made progress against our four primary targets – growing cash flow and returns, reducing costs, and strengthening the balance sheet – but know there is more work to be done, and we are clear on the urgency to deliver. With a continued emphasis on capital discipline and returns, we are reducing capital expenditure for 2026 to the lower end of the guidance range, while continuing to drive down our cost base. We are also taking decisive action to high-grade our portfolio and strengthen our company, including the execution of our 20 billion dollar disposal programme and the decision to suspend the share buyback and fully allocate excess cash to our balance sheet.»
Analyst Perspective
Derren Nathan, head of equity research at Hargreaves Lansdown, said: «Management is taking some decisive action to fix the balance sheet, scrapping the buyback, doubling down on non-core disposals and upping structural cost-savings targets.»
He added: «This leaner, meaner approach could pave the way for more sustainable payouts to shareholders further down the line, but with investment spend coming down, investors will want some assurance on BP's plans to remain an energy leader over the long term.»
Industry Context
BP's challenges reflect broader headwinds in the oil sector. Rival Shell reported a 22% plunge in 2025 underlying earnings to 18.53 billion dollars, with fourth-quarter earnings tumbling 40% quarter-on-quarter. However, Shell announced new share buybacks of 3.5 billion dollars alongside a dividend hike.
BP also recorded a write-down of around 4 billion dollars for underperforming solar and renewable natural gas businesses. The company's debt pile stands at 22.18 billion dollars, marginally down from 23 billion dollars in 2024.
Note: This article was created with Artificial Intelligence (AI).
