BP Halts Share Buybacks and Intensifies Cost-Cutting Amid Profit Slump
The FTSE 100 oil giant BP has announced a significant suspension of its share buyback programme and a sharp increase in its cost-saving targets, following a substantial decline in annual profits. This strategic shift comes as the company grapples with the impact of steep falls in crude oil prices throughout 2025.
Sharp Decline in Annual Profits
BP reported a 16% fall in underlying replacement cost profits, which is the company's preferred earnings measure, dropping to 7.49 billion US dollars (£5.47 billion) for the year 2025. This represents a decrease from 8.92 billion dollars (£6.52 billion) recorded in 2024. The fourth quarter of 2025 saw earnings fall by 30% compared to the previous quarter, settling at 1.54 billion dollars (£1.12 billion). However, this figure was 32% higher than the same period a year earlier and aligned with market expectations.
Cost-Saving Targets Increased
In response to the challenging market conditions, BP has revised its cost-saving objectives upwards. The group is now targeting savings of 5.5 billion to 6.5 billion dollars (£4.02 billion to £4.75 billion) by the end of the next year. This marks a significant increase from the previous target of up to 5 billion dollars (£3.65 billion). The move underscores the company's commitment to enhancing operational efficiency and financial resilience.
Suspension of Share Buybacks
In a development that disappointed investors, BP announced the suspension of its share buyback programme. The decision is aimed at accelerating the strengthening of its balance sheet. This announcement led to a 4% decline in BP's shares during morning trading on Tuesday, 10 February 2026. The suspension reflects the company's prioritisation of financial stability over immediate shareholder returns.
Leadership Changes and Market Pressures
The profit slump comes after a year of considerable turmoil for BP. The company faced pressure from activist investor Elliott Investment Management and witnessed the departure of Murray Auchincloss as chief executive after less than two years in the role. Meg O'Neill, the boss of Woodside Energy, has been appointed as his replacement and is scheduled to commence her duties on 1 April. Interim leader Carol Howle emphasised the urgency of delivering on key targets, stating that while progress has been made in growing cash flow, reducing costs, and strengthening the balance sheet, more work is required.
Impact of Falling Crude Prices
BP's difficulties were exacerbated by significant declines in crude oil prices during 2025, with oil dropping below 60 dollars a barrel for the first time in nearly five years. This price rout has also affected competitors; Shell recently reported a 22% plunge in its 2025 underlying earnings to 18.53 billion US dollars (£13.6 billion). Unlike BP, Shell announced additional share buybacks and a dividend increase, highlighting differing strategic responses within the industry.
Additional Financial Challenges
Beyond the external market pressures, BP faces internal financial hurdles. The company confirmed a write-down of approximately 4 billion dollars (£2.92 billion) on the value of its underperforming solar and renewable natural gas businesses. Additionally, BP's debt pile currently stands at 22.18 billion dollars (£16.22 billion), slightly down from 23 billion dollars (£16.82 billion) in 2024. This figure does not include around 6 billion dollars (£4.38 billion) in expected proceeds from the sale of a majority stake in its Castrol lubricants business, which was announced in December.
Expert Analysis and Future Outlook
Derren Nathan, head of equity research at Hargreaves Lansdown, commented on BP's actions, noting that management is taking decisive steps to repair the balance sheet by scrapping the buyback, intensifying non-core disposals, and increasing structural cost-savings targets. He suggested that this leaner approach could lead to more sustainable shareholder payouts in the future. However, he cautioned that with reduced investment spending, investors will seek reassurance regarding BP's long-term strategy to maintain its position as an energy leader.
Carol Howle further elaborated on the company's plans, indicating a continued emphasis on capital discipline and returns. BP is reducing capital expenditure for 2026 to the lower end of its guidance range while driving down its cost base. The company is also executing a 20 billion dollar (£14.62 billion) disposal programme and fully allocating excess cash to strengthen its balance sheet, rather than resuming share buybacks in the immediate term.
