BP finally bites the bullet and axes its buyback

It’s been fairly obvious for quite some time now that BP’s policy of buying back its shares on a quarterly basis has been a questionable one given its stated ambition to lower its debt levels substantially by 2027.

More’s the pity it’s taken management so long to realise what’s been pretty obvious for nearly a year now, with this morning’s announcement that the $750m share buyback program is being suspended.

Not a moment too soon, and while the shares have moved lower, the reaction has been fairly modest with the shares down slightly from their recent 20-month highs.

With new CEO Meg O’Neill due to start in a couple of months it could well be she may have had a part to play in today’s decision to cut the buyback, so that she can focus on improving the business straight from the off.

It is welcome that BP management have finally grasped the reality that if you want to show that you are serious about reducing your debt levels to between $14bn to $18bn by the end of 2027, then it’s going to take more than heroic assumptions about disposals, as well as new production capacity, when your net debt pile rose to $26bn in Q3.

Hopefully this is the shape of things to come with new management unafraid to take difficult, but necessary decisions to turn around a business that has been poorly run for years under the stewardship of previous CEO’s Looney and Auchincloss.

The net debt number has come down in today’s Q4 numbers to $22.18bn due to proceeds from divestments of $3.6bn, putting it slightly down from the same period last year, however BP’s Q4 performance still leaves much to be desired.

The company slid to a $3.4bn loss, almost wiping out its annual profits for the year, which fell to a pitiful $55m, down from $381m in 2024.

Part of the reason for this Q4 loss was BP writing down the value of its green energy business to the tune of $3.1bn.  

BP has been making some progress on the divestment front with recent deals to sell its stake in US Permian and Eagle Ford shale assets to Sixth Street for $1.5bn, and a $6bn deal to sell a 65% stake in its Castrol business to Stonepeak, at the end of last year.

Nonetheless, BP needs to do more when it comes to reducing its costs and improving its operational efficiency.

With an expectation of an oil price of $76 this past year it’s no surprise the business has been struggling, and while recent new discoveries in Brazil, as well as a new $25bn deal in Iraq are welcome, BP needs to improve its margins across the board, as it continues to wean itself off its misguided shift to renewables at the expense of its core business.