BP shares fell more than 4% following the announcement of the suspension of its quarterly share repurchase program, a move the company justified as part of a strategy to reduce its indebtedness and refocus its investments towards assets with higher profitability, mainly in the oil and gas sector.
Share repurchase and financial reorganization
BP confirmed that it will not carry out share repurchases this quarter, after having allocated 750 million dollars for this purpose in the previous quarter. The company has reduced its net debt to 22 billion dollars and maintains a target of between 14 and 18 billion dollars for 2027. This decision coincides with a change in leadership, as Meg O’Neill will take over as CEO in April.
Analysts were divided in their reaction: while Berenberg noted that this was to be expected, RBC and Barclays considered that abandoning buybacks was sensible given the current financial pressures. However, the market responded negatively, down as much as 5.7% in morning trading.
Renewable energy depreciation and return to hydrocarbons
BP also announced impairment charges of close to 4 billion dollars associated with its investments in low-carbon projects. Among the most affected assets are the Lightsource BP solar unit and the biogas firm Archaea, acquired for more than 4 billion in 2022. The company acknowledged that it has reduced the number of plants under execution and will prioritize projects with better returns.
The reorientation towards oil and gas is also reflected in its recent discovery in Brazil. The Boomerangue fieldfield, considered BP’s BP’s largest hydrocarbon find in 25 years, could contain up to 8 billion barrels of oil and condensate. in 25 years, could contain up to 8 billion barrels of oil and condensate. The company plans to drill appraisal wells later this year, with an estimated exploitation potential between 25% and 40% according to Citi.
Financial results and global context of the sector
Despite the adjustments, BP reported an adjusted profit of US$1.54 billion in the fourth quarter, 32% higher than the same period last year. This positive performance contrasts with the decision to curb buybacks, which generates uncertainty about the balance between shareholder return and financial sustainability.
While some oil companies such as Equinor have significantly reduced their buybacks, others such as Shell and Exxon have maintained them, reflecting divergent strategies in a context of volatile crude oil prices.
BP is now betting on stabilizing its financial structure and capitalizing on key discoveries, adjusting its energy transition vision to a more pragmatic, hydrocarbon-focused approach. hydrocarbons.
Source: Reuters
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