BP Reports Profit Decline and Expands Cost-Cutting Goals
BP has announced a decrease in its annual profits alongside an increased target for cost reductions, as the oil major was impacted by a roughly 20% decline in crude oil prices last year.
The company reported profits of $7.5 billion (£5.5 billion) for 2025, down from $8.9 billion the previous year, reflecting the challenging market conditions.
In response, BP has suspended its share buyback program and is reducing expenditures to reinforce its financial position.
Strategic Shift and Leadership Change
BP has recently shifted its strategic focus away from investments in renewable energy projects to concentrate more on its oil and gas operations. Meg O'Neill, who will assume the role of chief executive in April, is expected to continue this approach.
O'Neill, formerly the head of Australian oil and gas company Woodside Energy, will become the first woman to lead a major global oil firm.
Carol Howle, BP's current interim chief executive, expressed optimism about O'Neill's appointment, stating the company anticipates accelerating progress to build "a simpler, stronger and more valuable BP for the future."
"We look forward to Meg O'Neill's arrival as we accelerate our progress to build a simpler, stronger and more valuable BP for the future." – Carol Howle, BP interim CEO
Shareholder Pressure and Investment Priorities
BP has faced criticism from shareholders for lagging behind competitors in recent years. A year ago, the company announced reductions in planned renewable energy investments to allocate billions more annually to its core oil and gas operations.
The company is also focused on reducing its debt, which currently stands at approximately $22 billion.
Enhanced Cost-Saving Targets and Asset Sales
In its latest financial update, BP stated it aims to achieve cost savings between $5.5 billion and $6.5 billion by the end of 2027. This represents an increase from the previous target of up to $5 billion and follows the decision to sell a 65% stake in its Castrol business.
"Management is taking some decisive action to fix the balance sheet, scrapping the buyback, doubling down on non-core disposals and upping structural cost-savings targets." – Derren Nathan, Head of Equity Research, Hargreaves Lansdown
"Prioritising balance sheet strength in a softer commodity price environment is a prudent step." – Maurizio Carulli, Global Energy Analyst, Quilter Cheviot
Quarterly Profit Decline Amid Lower Oil Prices
BP's profits in the final quarter of the year fell by 30% to $1.54 billion, coinciding with Brent crude oil prices dropping below $60 per barrel for the first time in over four years.
Industry Context and Competitor Performance
Similarly, rival oil company Shell reported a decline in profits in its annual results last week, with underlying earnings of $18.53 billion for 2025, marking a 22% decrease compared to the previous year.
Leadership Transition and Company Challenges
O'Neill will take the helm at BP during a challenging period. The previous chief executive, Murray Auchincloss, resigned after less than two years in the role.
Auchincloss had succeeded Bernard Looney, who was dismissed in 2023 after being found guilty of "serious misconduct" related to undisclosed relationships with colleagues.
Expert Opinions on New Leadership
Cornelia Meyer, chief executive of Meyer Resources and former BP executive, told the BBC that O'Neill has "a stellar track record" and is likely capable of revitalising BP's performance.
"If anybody can revive BP's fortunes, she probably can." – Cornelia Meyer, CEO Meyer Resources
She added that O'Neill would "instil discipline," noting, "she's an oil woman, she's not a renewables woman."
Shareholder Concerns Over Investment Strategy
Despite the leadership change, BP faces scrutiny from some stakeholders regarding its recent investment decisions.
A coalition of pension funds has submitted a resolution for BP's annual general meeting in April, questioning whether the increased spending on oil and gas operations will yield the best returns for shareholders.
