BP Halts Share Buybacks Amid Oil Price Slump Pressure

BP, the UK oil giant, suspended its share buyback program on Tuesday. This came after the company reported fourth-quarter profits that matched analyst expectations. The decision points to growing strain from crude oil prices, which fell below $60 a barrel for the first time in nearly five years. The move happened in London, where BP is based, as global energy markets face uncertainty.

Background

BP has faced tough times in recent years. Oil prices have swung wildly, affected by supply changes from groups like OPEC+ and shifts in global demand. The company shifted its plans in 2024 to focus more on oil and gas projects after earlier pushes into renewables slowed down. This change aimed to lift profits and returns for shareholders.

Last year, BP started several big projects. By early 2025, three of ten major oil and gas developments were up and running. These were meant to boost production and cash over time. But low oil prices have eaten into gains. Crude dropped sharply in recent months, hitting levels not seen since 2020.

The company also dealt with leadership changes. Murray Auchincloss led BP through a strategy reset. Now, Meg O'Neill is set to take over as CEO. Some advisors suggested pausing buybacks to give her room to handle finances. BP's shares have lagged behind rivals like Shell and Exxon, adding pressure from investors.

Net debt rose in early 2025, reaching $27 billion by the first quarter's end. Operating cash flow fell sharply to $2.8 billion from higher levels before. The firm targets cutting debt to $14-18 billion by 2027. These factors built up to Tuesday's announcement.

Key Details

BP's fourth-quarter profit came in line with what analysts expected. This followed a dip in crude prices. The company reported underlying replacement cost profit – a key measure close to net profit – at levels that met forecasts.

In the first quarter of 2025, results were weaker. Profit dropped to $1.38 billion, below the $1.53 billion expected and half of the $2.7 billion from early 2024. Cash flow tumbled due to inventory builds, bonus payments, and other timing issues. BP expects much of this to reverse later in the year.

Share buybacks were cut. The program for before second-quarter results dropped to $750 million, down $1 billion from the prior $1.75 billion. Earlier in 2024, BP kept buybacks steady despite profit dips, but pressure mounted.

"I’m pleased to say that 2025 is off to a great start, with three of these projects now safely started up, delivering production and generating cash flow and returns." – Murray Auchincloss, BP CEO

BP's chief financial officer, Kate Thomson, noted the cash flow drop tied to seasonal effects. She said three-quarters of the working capital build should unwind through the year. Shares fell 3.6% in London after the news, as investors worried about future payouts.

Investor and Market Reactions

Analysts had flagged BP as most at risk among big oil firms to cut buybacks. Activist investor Elliott pushed for cost cuts and better performance. The suspension gives the new CEO flexibility amid oil price drops of 10% early in the second quarter.

BP plans ten major projects by 2027 to ramp up output. Early starts show progress, but low prices limit immediate benefits. The firm holds assets in the North Sea, Gulf of Mexico, and elsewhere, all hit by the price slump.

What This Means

The buyback halt signals oil majors feel the pinch from low prices. It frees up cash for debt reduction or investments in projects. BP aims to stay within a financial frame that balances shareholder returns and stability.

Lower crude prices affect the whole sector. Rivals may follow with their own cuts if prices stay down. Demand worries from slower growth in China and elsewhere play a role. Supply from non-OPEC sources adds to the mix.

For BP, this buys time for the new CEO. O'Neill can focus on core oil and gas without draining cash on buybacks. Debt targets remain key, with plans to shrink the balance sheet. Projects coming online could help if prices recover.

Shareholders now watch payouts closely. Dividends might face scrutiny next if cash stays tight. The move matches a broader trend where energy firms prioritize balance sheets over returns in tough markets.

Oil traded below $60 this week, pressuring costs and profits. BP's decision reflects caution. It positions the company to weather volatility while pushing forward with growth plans. Markets will track oil prices and upcoming earnings for signs of change.