• Annual profits decline for a third consecutive year as crude prices weaken.
• Company raises cost saving targets and suspends share buybacks to shore up balance sheet.
• Strategic focus continues to move away from renewables towards core oil and gas assets.
BP has reported a decline in annual profits and announced more aggressive cost cutting measures as lower global oil prices weighed on earnings during 2025.
The energy major posted profits of 7.5 billion dollars for the year, down from 8.9 billion dollars in 2024, following an approximate 20 percent fall in crude oil prices. BP said the downturn had prompted the suspension of its share buyback programme and a reduction in overall spending as it works to strengthen its financial position.
The company is continuing a strategic shift away from renewable energy investments, refocusing capital on oil and gas operations. This direction is expected to continue under incoming chief executive Meg O’Neill, who will assume the role in April. O’Neill previously led Australian producer Woodside Energy and will become the first woman to head a major global oil company.
BP interim chief executive Carol Howle said the group was preparing for O’Neill’s arrival as it accelerates efforts to build a simpler and more valuable business for the future. The company has faced mounting pressure from shareholders amid several years of weaker performance relative to its peers.
Debt reduction remains a priority, with net debt standing at approximately 22 billion dollars. BP now aims to deliver cost savings of between 5.5 billion and 6.5 billion dollars by the end of 2027, an increase on its previous target of up to 5 billion dollars. The revised goal follows the sale of a 65 percent stake in its Castrol lubricants business.
According to Derren Nathan, head of equity research at Hargreaves Lansdown, management is taking decisive steps to repair the balance sheet through the suspension of buybacks, increased asset disposals and higher structural cost saving targets.
Fourth quarter performance reflected the challenging environment. Profits for the final three months of 2025 fell by 30 percent to 1.54 billion dollars as Brent crude prices dropped below 60 dollars per barrel for the first time in more than four years. BP’s annual profits have now declined for three consecutive years, having peaked at 27.7 billion dollars in 2022 following the surge in energy prices after Russia’s invasion of Ukraine.
BP’s underlying replacement cost profit for the fourth quarter stood at 1.5 billion dollars, down from 2.2 billion dollars in the previous quarter. The reported quarterly result was a loss of 3.4 billion dollars, largely due to impairment charges of around 4 billion dollars linked primarily to transition related assets within the gas and low carbon energy segment.
Segment performance was mixed. Gas and low carbon energy posted an underlying quarterly profit of 1.4 billion dollars, down slightly on the previous quarter, reflecting lower realizations. Oil production and operations delivered an underlying profit of 2.0 billion dollars, impacted by production mix and lower equity accounted income. The customers and products segment reported an underlying profit of 1.3 billion dollars, with weaker trading, lower seasonal volumes and reduced refinery throughputs offsetting stable fuel margins.
Operating cash flow for the quarter reached 7.6 billion dollars, while net debt declined to 22.2 billion dollars, supported by divestment proceeds of 3.6 billion dollars. BP reiterated its target to reduce net debt to between 14 and 18 billion dollars by the end of 2027 and confirmed its commitment to maintaining an A grade credit profile.
The board confirmed a fourth quarter dividend of 8.320 cents per share and expects dividends to grow by at least 4 percent annually. However, guidance for shareholder distributions linked to operating cash flow has been withdrawn as excess cash is redirected towards balance sheet strengthening.
Looking ahead, BP has set its 2026 capital expenditure budget at between 13 and 13.5 billion dollars, which it believes will support long term earnings growth while maintaining capital discipline. Rival major Shell also reported weaker results last week, highlighting the broader impact of softer oil prices across the global energy sector.
Author: Bryan Groenendaal
