The BP logo is displayed outside a petrol station near Warminster in Wiltshire, England, on Aug. 15, 2022.
Matt Cardy | Getty Images News | Getty Images
British oil major BP on Tuesday posted a sharp drop in fourth-quarter profit on weaker refining margins, announcing a $1.75 billion share buyback and a pledge to “fundamentally” reset its strategy.
The energy firm posted underlying replacement cost profit (RC profit) — used as a proxy for net profit — at $1.169 billion in the fourth quarter, compared with $2.99 billion in the same period of last year and with an analyst forecast of $1.2 billion, according to a LSEG poll.
The company attributed its quarterly 48% drop in RC profit to “weaker realized refining margins, higher impact from turnaround activity, seasonally lower customer volumes and fuels margins and higher other businesses & corporate underlying charge.”
BP’s net debt hit just shy of $23 billion in the fourth quarter, increasing 10% year-on-year. Capital expenditure (capex) hit $3.7 billion in the October-December period, a steep drop from the $4.7 billion of fourth quarter 2024.
Despite this, the embattled energy company launched a $1.75 billion share buyback for the fourth quarter, with a dividend per ordinary share of $0.08.
In a statement accompanying the results, CEO Murray Auchincloss said the company has been “reshaping” its portfolio with a “strong progress” in cutting costs and a planned further overhaul ahead.
“We now plan to fundamentally reset our strategy and drive further improvements in performance, all in service of growing cash flow and returns. It will be a new direction for bp,” he said.
Oil majors have weathered a turn in tide over the past year, as crude prices retreated after initial support following Russia’s 2022 invasion of Ukraine and Western and G7 sanctions against Moscow’s barrels. In a January trading update, BP flagged higher corporate costs, lower fourth-quarter realized refining margins and one-off charges linked to its bio-ethanol acquisition.
BP has broadly underperformed its peers, with shares falling roughly 9% over the last year to the end of last week — compared with 6% gains for Shell. The stock gained ground on Monday, following weekend reports that activist investor Elliott Management has built a stake in the struggling oil major, fueling speculation that the influential hedge fund could pressure the energy company to shift gears on its core oil and gas businesses.
Speculation has otherwise long mounted over whether BP could become a takeover target – though the company’s £74-billion size could pose a challenge for suitors.
BP has sought to turn its fortunes through a major restructuring that included a downsize in leadership amid Auchincloss’ efforts to deliver at least $2 billion of cash savings by the end of 2026. In January, the firm expanded its cost-cutting drive to cut 4,700 of roles and last week revealed it is seeking buyers for its Ruhr Oel GmbH German refinery assets. But concerns linger over the clarity of BP’s strategic direction amid its sprawling green energy ambitions — with the company due to supply its next strategic update on Feb. 26.
In a Friday note, RBC analysts stressed a key point remained whether BP would reconcile its balance sheet through a slowdown of its share repurchase program – noting market expectations that the oil major would now commit to around $1 billion of buybacks per quarter, versus $1.75 billion previously.
“We expect questions during the conference call on the impact on BP’s downstream operations from US tariffs on Canadian crude as it relates to the profitability of its refineries in the US,” the analysts noted, stressing that the company’s other challenge relates to poor capital allocation that has deteriorated its earnings potential.
