BP shares are under scrutiny ahead of the London trading session after the energy giant announced a suspension of its share buyback initiative. The company is shifting its capital allocation strategy toward strengthening its balance sheet and reducing debt, while maintaining its quarterly dividend at 8.32 cents per share.
Financial Performance and Strategic Shift
For the full year 2025, BP posted an underlying replacement cost profit of $7.5 billion, with $1.54 billion earned in the fourth quarter. Interim CEO Carol Howle emphasized a heightened focus on execution, outlining reduced 2026 capital expenditure guidance of $13-13.5 billion. The company also revealed a preliminary estimate of approximately 8 billion barrels of liquids at its Bumerangue discovery offshore Brazil.
Finance chief Kate Thomson acknowledged roughly $4 billion in impairments linked to renewables and biogas assets, stating plainly, "I really don't like taking impairments." Net debt declined to about $22 billion from $26 billion in the prior quarter. The strategic pivot away from buybacks signals to shareholders that dividends are no longer assured as the firm prioritizes financial resilience.
Market and Commodity Context
BP's stock fell as much as 7% following the announcements. Meanwhile, Brent crude traded at $69.67 a barrel early Thursday, gaining 27 cents amid U.S.-Iran tensions, though significant inventory builds in the U.S. limited upward momentum. Analysts suggest a sustained move above $65-66 for WTI would likely require further escalation in the Middle East.
Supply-side dynamics are coming into focus as OPEC projected weaker demand for OPEC+ crude in the second quarter. The group is scheduled to meet on March 1, where eight members will consider potential production increases for April. Traders are also awaiting the International Energy Agency's latest forecast.
The broader outlook for oil producers remains challenging. The U.S. Energy Information Administration's February forecast anticipates inventory builds and predicts WTI prices remaining below $60 per barrel through 2027, a scenario that would pressure industry cash flows if realized.
BP faces several near-term risks, including potential crude price volatility from geopolitical developments, challenges in asset divestments, or further charges in its low-carbon portfolio. The company's bet that a stronger balance sheet can offset weaker shareholder returns will be tested in the coming months, with traders closely watching the IEA update and the upcoming OPEC+ decision for signals that could move both oil prices and BP's share price.
