BP, the FTSE 100 oil and gas giant, has announced a suspension of its share buyback programme and an escalation of cost-cutting measures following a significant slump in annual profits. The company revealed a sharp decline in earnings for 2025, attributed primarily to steep falls in crude oil prices that have impacted the broader energy sector.
Profit Plunge and Financial Performance
BP reported a 16% decrease in underlying replacement cost profits, which is the firm's preferred measure of earnings, dropping to 7.49 billion US dollars (approximately £5.47 billion) for the full year 2025. This marks a notable decline from the 8.92 billion dollars (around £6.52 billion) recorded in 2024, highlighting the challenging market conditions faced by the oil major.
The fourth quarter of 2025 saw earnings fall by 30% compared to the previous quarter, settling at 1.54 billion dollars (about £1.12 billion). However, this figure was 32% higher than the same period a year earlier and aligned with market expectations, indicating some resilience amid the downturn.
Strategic Cost-Saving Initiatives
In response to the profit decline, BP has ramped up its cost-saving targets, now aiming for savings between 5.5 billion and 6.5 billion dollars (roughly £4.02 billion to £4.75 billion) by the end of the next year. This represents an increase from the previous target of up to 5 billion dollars (approximately £3.65 billion), underscoring the company's aggressive approach to financial management.
The suspension of the share buyback programme is a strategic move designed to accelerate the strengthening of BP's balance sheet, a decision that may disappoint investors seeking returns. This action follows a year of turmoil for the company, including pressure from activist investor Elliott Investment Management and the departure of chief executive Murray Auchincloss after less than two years in the role.
Leadership Changes and Future Outlook
Meg O'Neill, currently the boss of Woodside Energy, has been appointed as the new chief executive and is set to commence her role on April 1. In the interim, Carol Howle is leading the company and has emphasised the urgency of delivering on key targets.
Howle stated, "We have made progress against our four primary targets – growing cash flow and returns, reducing costs, and strengthening the balance sheet – but know there is more work to be done, and we are clear on the urgency to deliver." She added that BP is reducing capital expenditure for 2026 to the lower end of its guidance range while continuing to drive down the cost base.
The company is also executing a 20 billion dollar disposal programme and has decided to fully allocate excess cash to the balance sheet, rather than continuing share buybacks. These measures reflect BP's focus on capital discipline and portfolio optimisation in a volatile oil market, as it navigates ongoing challenges and seeks to stabilise its financial position for the future.
