BP has paused its programme of share buybacks and taken about $4 billion of writedowns related to its renewables and biogas businesses, the company said as it reported quarterly adjusted profit in line with expectations. The decision comes ahead of a change at the top of the firm, with Meg O'Neill set to become chief executive in April.
The group said the funds that would have been returned to shareholders will instead be channelled into oil and gas projects where it anticipates superior returns. BP noted that it has a priority to strengthen its balance sheet and reduce leverage.
"The move to pause the buyback is the right long-term call given the relatively weak balance sheet and emphasis on de-leveraging," said RBC analyst Biraj Borkhataria.
On the market reaction, shares fell 5.4% in morning trading, while a broader index of European energy companies slipped 0.9%.
Analysts had been anticipating that buyback programmes at major European energy firms could shrink amid weaker oil and gas prices. Norway's Equinor last week cut its buyback programme by 70%, while Shell and Exxon have maintained their buyback levels.
BP repurchased $750 million of its own stock over the past three months, and LSEG data show the company had been buying back shares every quarter since the second quarter of 2021.
On the balance sheet front, BP reduced net debt to $22 billion from $26 billion in the prior quarter, and reiterated a targeted net debt range of $14 billion to $18 billion by 2027.
For the fourth quarter, BP reported underlying replacement cost profit - its adjusted net income metric - of $1.54 billion, a 32% increase from the same period a year earlier.
The company has in the past year refocused on hydrocarbons. Under then-CEO Murray Auchincloss, BP announced a strategy reset back to oil and gas, positioning that shift as a route to improved profitability after prior investments in renewables.
BP estimates that its Brazilian Bumerangue discovery contains 8 billion barrels of liquids in place, split equally between oil and condensate. The company said it plans to drill appraisal wells around the end of the year.
BP had earlier signalled potential impairments of up to $5 billion, and on this reporting it pointed to specific assets as primary drivers of the writedowns: its solar unit Lightsource bp, its U.S. biogas business Archaea, and its offshore wind operations. BP acquired Archaea in 2022 for $4.1 billion.
The firm has indicated intentions to sell a stake in Lightsource bp, has spun off its offshore wind operations into a joint venture called JERA Nex BP, and has abandoned plans for certain green projects, including a biofuel plant in Amsterdam and proposed hydrogen plants in Australia and Britain.
BP's decision to suspend buybacks and record substantial writedowns underscores the company's current emphasis on repairing its balance sheet and reallocating capital toward oil and gas opportunities as leadership changes approach. The measures also reflect the ongoing reassessment of investments in renewable and low-carbon projects within the company.