BP Halts Share Buybacks as Pressure on Energy Major Mounts

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(Bloomberg) — BP Plc is halting share buybacks to shore up its balance sheet as pressure mounts on the UK energy giant to deliver on its turnaround efforts. 

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The company is slashing a $750 million quarterly stock repurchases program that had already been reduced last year, according to a fourth-quarter earnings report Tuesday. BP also withdrew its standing guidance of returning 30% to 40% of operating cash flow to shareholders. 

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The quarter capped a tumultuous year for BP that started with activist investor Elliott Investment Management pushing for drastic change and ended with Chairman Albert Manifold ousting Murray Auchincloss from the helm. Oil prices have fallen since it outlined a strategic shift last year.

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Oil prices are trading below the roughly $73 a barrel BP assumed for 2026 in its plan last year. BP also said upstream production is expected to be slightly lower than last year.

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Like rival Shell Plc, BP has been slower to increase production than its US peers. On a positive note, BP said the big Bumerangue discovery in Brazil has 8 billion barrels of liquids in place, split 50%-50% between crude and condensate.

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So far this year, the shares of the two London-based companies have lagged behind in dollar terms among the top five oil majors, including European peer TotalEnergies SE, which has been expanding aggressively in Africa. 

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BP said cost cuts will be deepened by as much as $1.5 billion through the end of 2027, thanks to the divestment of lubricant business Castrol. As part of its turnaround plan last year, the company had announced targets of $4 billion to $5 billion of cost cuts by the end of 2027.

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BP said at the end of last year it will raise about $6 billion from the sale of a majority stake in Castrol. 

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Net income of $1.54 billion came in line with the average analyst estimate of $1.53 billion. 

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Meg O’Neill, the Woodside Energy Group Ltd. chief executive officer picked to replace Auchincloss, takes over this coming April. Her track record as a champion of fossil fuels suggest she’ll speed up a shift away from low-returning clean energy projects that has been welcomed by shareholders.

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As flagged last month, BP took a writedown of about $4 billion from its energy transition business in the fourth quarter. That included Archaea Energy, the biogas business BP agreed to buy for $4.1 billion in 2022, as well as its solar and battery unit Lightsource and offshore wind assets.

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Asset impairments charges since the end of 2022 — when BP first began retreating from its low-carbon ambitions — have piled up to nearly $25 billion, RBC analyst Biraj Borkhataria said before the earnings report. 

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BP purchased Archaea Energy in 2022 as part of its expansion into lower-carbon fuels. But the renewable natural gas business that was supposed to benefit the environment and BP’s net zero emissions targets has faltered, as have BP’s climate ambitions.

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The assets that were part of the writedowns had been core to BP’s green goals, when former CEO Bernard Looney in 2020 announced a move into low-carbon ventures and away from oil and gas.

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