BP shares slid sharply on Tuesday after the oil major paused its share buyback programme and booked around $4bn in charges linked to its renewables and biogas businesses, as the company prepares for a leadership transition.
BP said the decision reflects a strategic reset ahead of incoming chief executive Meg O’Neill, who is due to take over in April. The group plans to redirect cash away from buybacks towards reducing debt and reinvesting in oil and gas projects where it expects stronger returns.
The move rattled investors. BP shares were down about 4.2% by midday, after falling as much as 5.7% earlier in the session, underperforming a broader European energy index that was off around 0.5%.
Analysts at Berenberg said the removal of buybacks was not unexpected, but noted that markets reacted negatively, particularly as BP also dropped its previous commitment to return 30%–40% of operating cash flow to shareholders through dividends and buybacks.
By contrast, analysts at RBC and Barclays said halting buybacks was a sensible step given the company’s debt position.
Focus shifts to debt reduction
BP said it had cut net debt to $22bn, down from $26bn in the previous quarter, and reaffirmed its target of reducing debt to $14bn–$18bn by 2027.
The move comes amid broader concerns that European oil majors may scale back buybacks as oil and gas prices soften. Norway’s Equinor cut its buyback programme by 70% last week, although Shell and Exxon have so far maintained their plans.
BP had repurchased $750m worth of shares over the past three months and has conducted buybacks every quarter since the second quarter of 2021, according to LSEG data.
Despite the strategic reset, BP reported a fourth-quarter underlying replacement cost profit of $1.54bn, up 32% year-on-year, highlighting resilient earnings even as it reshapes its capital allocation strategy.
