BP Cuts Costs As Profits Fall

BP is cutting costs and has stopped buying back its own shares. This happens because profits have gone down for three years in a row. The company is now focusing more on oil and gas.
By Newsroom | Business, Energy |

BP, a global energy company, is implementing significant cost-cutting measures and has suspended its share buyback program. This strategic pivot follows a sustained period of declining annual profits, with the company reporting a 16% drop in underlying replacement cost profits for 2025, totaling $7.49 billion. This decline is attributed to lower oil and gas prices. The company's leadership is undertaking these actions to strengthen its financial position and address investor concerns regarding profitability and share performance.

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Financial Pressures and Strategic Realignment

BP's financial performance has been a key point of discussion. The company's annual profits have now fallen for three consecutive years. This trend has led to a notable shift in investment strategy.

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  • Investment Reallocation: A year ago, BP announced plans to reduce investment in renewable energy and redirect billions of dollars annually toward its core oil and gas operations.

  • Profit Figures: In 2025, underlying replacement cost profits decreased by 16% to $7.49 billion, a notable drop from $8.92 billion in 2024.

  • Shareholder Returns: The suspension of the share buyback program, while intended to bolster finances and reduce debt, has impacted the company's share price, which fell by 4.1% in early trading. The dividend per ordinary share was maintained at 8.3 cents.

Leadership Transition and Investor Influence

The company has experienced leadership changes and faced pressure from investors, influencing its strategic direction.

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  • New Leadership: Meg O'Neill, formerly head of Australian oil and gas firm Woodside Energy, has been appointed as the new chief executive, becoming the first woman to lead a major global oil firm. She is set to assume the role on April 1. This follows the departure of Murray Auchincloss, who served as chief executive for less than two years.

  • Activist Investor Involvement: Reports indicate that Elliott Investment Management has been a notable activist investor, putting pressure on BP to cut costs. This pressure appears to have been a significant factor in the company's decision to scale back its sustainability ambitions and renew its focus on oil and gas.

Evidence of Cost-Cutting Measures

Multiple reports confirm BP's heightened focus on cost reduction.

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  • Deepened Cost-Cutting Goal: The company has increased its target for cost savings.

  • Asset Disposals: Management is accelerating efforts to sell off parts of the business.

  • Operational Adjustments: The company has been described as adopting a "leaner, meaner approach."

  • Past Reductions: In January, BP indicated plans to cut thousands of jobs and contractor positions.

  • Specific Schemes: A significant cost-cutting scheme was launched over the summer, with a plan totaling £1.6 billion unveiled in September 2025.

Strategic Reassessment of Energy Transition

BP's commitment to renewable energy has been notably scaled back.

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  • Reduced Renewable Investment: Planned investments in renewable energy have been cut, with a greater emphasis placed on oil and gas opportunities.

  • Elimination of Goals: The company has reset its ambitions, including eliminating its oil production reduction goal.

  • Investor Concerns: While BP maintains its ambition to become net zero, investors have expressed concerns about profitability and the pace of the energy transition, advocating for a more balanced investment approach.

Shareholder Value and Future Outlook

The decisions made by BP are aimed at improving its financial standing and long-term shareholder value, though concerns remain.

  • Balance Sheet Strength: The suspension of buybacks and increased cost-cutting are seen as decisive actions to fix the balance sheet.

  • Sustainable Payouts: A leaner approach is expected to pave the way for more sustainable payouts to shareholders in the future.

  • Long-Term Leadership: Investors will seek assurance on BP's plans to maintain its position as an energy leader amidst reduced investment in new energy sectors.

  • Profit Drivers: Factors contributing to profit shortfalls have included lower gas prices, thinner margins, and operational challenges.

Sources

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Frequently Asked Questions

Q: Why is BP cutting costs?
BP's profits have fallen because oil and gas prices are lower. They want to save money.
Q: What is BP changing?
BP is cutting costs and focusing more on oil and gas instead of renewable energy. They have also stopped buying back shares.
Q: How much have BP's profits fallen?
BP's profits fell by 16% in 2025, reaching $7.49 billion.
Q: Who is the new leader at BP?
Meg O'Neill is the new chief executive. She is the first woman to lead a major global oil company.