TLDR
- BP shares dropped 5.4% in London after the company suspended its share buyback program to focus on balance sheet strength.
- Fourth-quarter profit of $1.54 billion matched expectations but fell from $2.21 billion in Q3 as oil prices weakened.
- The company will redirect excess cash from buybacks to accelerate debt reduction and financial stability.
- Annual profit declined to $7.49 billion from nearly $9 billion in 2024, missing analyst forecasts.
- BP raised cost-cutting targets to $5.5-6.5 billion by 2027 as new CEO Meg O’Neill prepares to take charge April 1.
BP stock fell sharply Tuesday following the British oil company’s decision to suspend share buybacks and prioritize balance sheet reinforcement. The announcement came alongside fourth-quarter earnings that met expectations but reflected ongoing pressure from declining crude prices.
Shares dropped 5.4% in London trading, placing the stock among the worst performers on the pan-European Stoxx 600 index. U.S.-listed shares declined 6% during pre-market hours.
The company reported underlying replacement cost profit of $1.54 billion for Q4, matching analyst projections. This figure marked a substantial decrease from the $2.21 billion reported in the third quarter.
BP’s board opted to suspend the buyback program entirely. All excess cash will now go toward accelerating balance sheet improvements rather than returning capital to shareholders.
The previous buyback announcement totaled $750 million in November. That program has now been shelved indefinitely.
Interim CEO Carol Howle emphasized progress on four strategic priorities: growing cash flow, improving returns, cutting costs, and strengthening the balance sheet. “We are clear on the urgency to deliver,” Howle stated.
Quarterly Results Show Pressure Points
Lower upstream realizations contributed to the profit decline between quarters. The company also faced headwinds from an unfavorable production mix and decreased refinery throughputs.
An unplanned outage at the Whiting refinery created additional challenges. Seasonally lower customer volumes compounded the pressure on quarterly results.
For the full year, BP posted net profit of $7.49 billion, below the $7.58 billion consensus estimate. This represented a drop from nearly $9 billion earned in 2024.
The company announced a Q4 dividend of 8.320 cents per ordinary share. BP stock currently yields 5.6% for income-focused investors.
Net debt for the quarter stood at $22.18 billion, down from roughly $23 billion in the same period last year. Operating cash flow climbed to $7.6 billion from $7.43 billion year-over-year.
Energy Sector Faces Market Headwinds
Oil prices posted their steepest annual decline since the pandemic in 2025. Concerns about oversupply have forced energy companies to reassess capital allocation strategies.
Rivals Shell and Equinor reported disappointing quarterly results last week. Both companies cited weak crude prices as a major factor in reduced profitability.
Equinor cut its 2026 buyback plan to $1.5 billion from $5 billion in 2025. The Norwegian energy firm also reduced spending on renewable and low-emission projects.
Shell kept its buyback steady at $3.5 billion, extending its streak to 17 consecutive quarters of $3 billion or more in repurchases.
BP increased its structural cost-reduction target to $5.5-6.5 billion by the end of 2027. The previous target stood at up to $5 billion.
Capital expenditure for 2026 is budgeted at $13-13.5 billion, reflecting the lower end of the company’s guidance range. Woodside Energy CEO Meg O’Neill will take over as BP’s chief executive on April 1, succeeding Murray Auchincloss who departed in late 2025.
Analysts maintain a Hold rating on BP stock with five Hold recommendations, three Buys, and one Sell. The average price target of $40.31 implies approximately 3% upside from current levels.
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