BP Shares Tumble as Buybacks Suspended, Profits Dip

BP (LON: BP) shares are under pressure today, down around 4%, after the energy giant announced a suspension of its share buyback program and reported a decline in full-year profits.

The move signals a shift in capital allocation strategy as BP prioritizes strengthening its balance sheet.

The company's underlying replacement cost (RC) profit, a key metric, fell to $7.5 billion for 2025, down from $8.9 billion in 2024.

Fourth-quarter underlying RC profit was $1.5 billion, compared to $2.2 billion in the prior quarter. This reflects lower upstream realizations, adverse impact of upstream production mix, lower refinery throughputs due to higher turnaround activity and the temporary impact of reduced capacity following an outage at the Whiting refinery and seasonally lower customer volumes.

Operating cash flow for the year landed at $24.5 billion, inclusive of a $2.9 billion adjusted working capital build. Capital expenditure totaled $14.5 billion. The company's net debt stands at $22.2 billion.

The dividend remains a priority, with an announced dividend of 8.320 cents per ordinary share for the fourth quarter, bringing the full-year dividend to 32.960 cents per share, an increase from 31.270 cents in 2024. Despite this, the suspension of share buybacks has unnerved the markets.

The decision to halt buybacks stems from a strategic pivot towards balance sheet improvement. BP aims to reach a net debt target of $14 to $18 billion by the end of 2027. According to the company, allocating excess cash to the balance sheet will create a stronger platform for investment in oil and gas opportunities.

BP's 2025 saw strong operational performance, with record upstream plant reliability at 96.1% and record refining availability at 96.3%. Upstream production held broadly flat compared to 2024, and seven major projects started up during the year. The reserves replacement ratio increased to 90%.

The company also made progress on its divestment program, exceeding $11 billion in expected proceeds from completed and announced deals. A key transaction is the agreement to sell a 65% stake in Castrol, which is expected to generate net proceeds of approximately $6 billion.

BP has increased its group structural cost reduction target to $5.5-6.5 billion by the end of 2027. Capital expenditure for 2026 is projected to be at the lower end of the guidance range, between $13-13.5 billion.