In a significant move, BP has paused its share buyback programme following a sharp decline in annual profits, a decision that underscores the challenges facing the oil giant as it embarks on a strategic reset under new leadership. The company reported underlying earnings of just under $7.5 billion (£5.5 billion) for 2025, a substantial drop from nearly $9 billion in 2024, reflecting a continued downturn in global oil prices, which have fallen for three consecutive years at the fastest rate since the pandemic.
A Shift in Financial Strategy
The suspension of quarterly buybacks, a practice BP had maintained since the pandemic’s initial economic shock, marks a pivotal change in the company’s approach to shareholder returns. This decision aims to bolster BP’s balance sheet amid pressing demands for a revitalised strategic vision. The company is currently under scrutiny from investors following a previous attempt to pivot towards greener energy initiatives, which was ultimately deemed unsuccessful.
Incoming chief executive Meg O’Neill, who will assume her role in April, is expected to implement a rigorous turnaround plan as BP’s third leader in as many years. O’Neill, formerly at the helm of Woodside Energy, faces the formidable task of restoring investor confidence and aligning the company’s direction with the evolving energy landscape.
Earnings Report and Investor Reactions
In its latest earnings report, BP revealed a 30% quarter-on-quarter decline in fourth-quarter profits, totalling $1.54 billion. While this figure represents a 32% increase compared to the same period last year and aligns with market expectations, the overall trend remains concerning. The company’s interim CEO, Carol Howle, noted progress against key objectives, including enhancing cash flows and reducing costs, yet acknowledged the urgency for further improvements.
Investor sentiment is increasingly critical, particularly from activist groups like Follow This, which argue that BP’s strategic indecision has left the company vulnerable. Founder Mark van Baal highlighted concerns regarding BP’s shift back to fossil fuels, questioning how the company plans to generate shareholder value amidst a projected decline in fossil fuel demand.
Renewed Focus on Fossil Fuels
In a notable departure from its previous green aspirations, BP has commissioned seven new oil and gas projects in the past year, indicating a renewed commitment to traditional energy sources. Impressively, five of these projects were completed ahead of schedule. This pivot raises eyebrows among environmental advocates and investors alike, who are wary of the long-term viability of fossil fuel investments.
In contrast, rival Shell reported a 22% decrease in adjusted earnings to $18.5 billion (£13.6 billion) for 2025, yet simultaneously announced plans for $3.5 billion in share buybacks, marking its 17th consecutive quarter of such actions. This juxtaposition highlights the differing strategies within the industry as companies navigate a complex market landscape.
Why it Matters
BP’s current predicament reflects broader trends within the global energy sector, where companies are grappling with the dual pressures of declining fossil fuel demand and the urgent necessity for environmental accountability. As BP reassesses its strategic path under new leadership, the implications of its decisions will resonate beyond the company itself, influencing investor confidence and shaping the future of energy investments. The choices made in the coming months will be critical not only for BP’s financial health but for the wider discourse on the energy transition and its sustainability.
