BP Steps Up Cost Cutting as Profits Slide
BP has recently announced a significant drop in annual profits and plans for enhanced cost-cutting measures in response to declining crude prices. The company reported profits of $7.5 billion (£5.5 billion) for 2025, marking a decline from $8.9 billion in the previous year, as oil prices decreased by approximately 20%. Here are the key updates you need to know:
Cost-Cutting Measures to Strengthen Finances
– Suspension of Share Buyback: BP has decided to pause its share buyback program as part of its financial strategy.
– Increased Cost Savings Target: The company aims for cost savings between $5.5 billion and $6.5 billion by the end of 2027, up from its earlier goal of $5 billion.
– Focus on Core Oil and Gas Operations: BP has shifted its investment strategy away from renewable energy projects, prioritizing oil and gas activities instead.
Leadership Transition
– New CEO Appointment: Meg O’Neill, formerly head of Woodside Energy, will assume her role as BP’s CEO in April. She will be the first woman to lead a major global oil company.
– Company’s Vision: Current interim chief executive, Carol Howle, expressed optimism about O’Neill’s leadership, emphasizing the need for a simpler, stronger and more valuable BP.
Financial Performance and Market Response
– Year-End Profit Decline: BP faced a 30% drop in profits during the last quarter, reporting $1.54 billion. This decline coincided with Brent crude oil prices falling below $60 a barrel for the first time in more than four years.
– Historical Context: This marks the third consecutive year that BP’s profits have decreased, with the peak occurring in 2022 at $27.7 billion after conditions worsened due to geopolitical factors, including Russia’s invasion of Ukraine.
Responses from Shareholders and Analysts
– Shareholder Pressure: BP has been under scrutiny from shareholders for its lagging performance compared to rivals. A pension fund group has submitted a resolution for BP’s annual general meeting to question the efficacy of increased spending on upstream operations.
– Expert Opinions: Industry experts, such as Cornelia Meyer, emphasize O’Neill’s strong background in the oil sector and her potential to instill necessary discipline within the company.
Conclusion
As BP faces significant challenges in restoring profitability, the company is intensifying its cost-cutting efforts and emphasizing its core oil and gas operations. With a new CEO at the helm, the direction BP chooses will be crucial for navigating the complexities of the energy market and addressing shareholder concerns. The shift back to oil and gas reflects broader industry trends, but it must also consider the long-term implications of such decisions on sustainability and shareholder value.