BP suspends share buybacks to reduce debt, sending shares down 7%
On Tuesday, BP suspended its share buybacks. It also took charges of about $4 billion on its renewables assets and biogas assets. This sent its shares down by 7% during afternoon trading.
The oil major said that it will shift money from its buybacks into shrinking debt and refocusing investment in oil and natural gas projects, where it expects higher returns.
Analysts at Berenberg were not surprised that buybacks have been removed, but they said the market viewed it negatively, along with BP's decision to drop its pledge to pay between 30% and 40% of operating cash flow as dividends and stock buybacks.
Analysts at RBC and Barclays said that cancelling buybacks is the best move for the company given its debt.
BP shares fell as much as 7% during afternoon trading. This is the largest daily percentage decline since April 2025 when the United States introduced sweeping 'tariffs. A broader index for European energy companies dropped 0.5%.
BP PUTS BUYBACKS ON HOLD AS IT CUTS BURDEN OF DEBT
The oil giant lowered its net debt from $26 billion to $22 billion during the last quarter. It also reiterated that it aims for a target amount between $14 billion and $18 billion by 2027.
Analysts predicted that European oil majors would reduce their buyback programs due to the lower prices of oil and gas. Equinor, a Norwegian oil company, cut its buyback program by 70% in the last week. Shell and Exxon, however, have not changed their buyback policies.
LSEG data shows that BP has repurchased 750 million dollars worth of shares in the past three months. It has been buying back shares every quarter since the second half of 2021.
The fourth-quarter adjusted net income or underlying replacement costs profit was $1.54billion, up by 32% compared to the same period last year.
Focus Returns to Oil and Gas
BP announced a year ago that it would return to its hydrocarbons strategy under the then-CEO Murray Auchincloss. The move was said to improve profitability following an ill-fated 'foray' into renewables made by Bernard Looney, BP's predecessor.
BP estimates that it has 8 billion barrels worth of liquids, divided between oil and condensate, in its Brazilian Bumerangue find, which is the company's biggest hydrocarbon discovery in 25 years.
The company plans to drill appraisal holes by the end of this year. Citi analysts estimate that around 25-40% of the resources could be tapped.
WRITES DOWN PROJECTS WITH LOW CARBON
BP flagged up to $ 5 billion in impairments before and listed on?Tuesday its offshore wind business, Lightsource bp and U.S. Biogas unit Archaea as the main reason. BP purchased Archaea for $4.1 billion in 2022.
(source: Reuters)
