BP p.l.c., traded on the New York Stock Exchange under the ticker BP, encountered a decrease in its stock price on Tuesday as the company declared a suspension of its stock buyback program. Instead, BP plans to allocate excess cash flow towards reducing its debt, signaling a commitment to a more pronounced balance sheet improvement. This decision came despite the company reporting adjusted earnings per American depositary share (ADS) slightly above consensus expectations, while total revenue fell short of forecasts.
For the quarter, BP delivered an adjusted earnings figure of 60 cents per ADS, narrowly surpassing the anticipated 59 cents, indicating modest profitability gains. However, total revenue reached $47.38 billion, which, although representing an increase from $45.75 billion a year prior, did not meet the analyst estimate of $49.36 billion. The company also reported a loss attributable to its shareholders amounting to $3.42 billion, compared to a $2.0 billion loss recorded in the equivalent quarter last year, reflecting ongoing financial pressures.
The replacement cost (RC) profit, a key profitability measure for BP, stood at $1.54 billion for the quarter. This value shows improvement from the prior year's $1.17 billion, underscoring operational profitability despite challenges. Operational cash flow totaled $7.60 billion, marking a slight increase from the previous year's $7.43 billion, providing the company with cash to manage expenditures and strategic initiatives.
Capital expenditures during the quarter were substantial at $4.17 billion, while divestments and other asset-related proceeds amounted to $3.6 billion. At the quarter's end, BP's net debt was recorded at $22.2 billion, highlighting the level of leverage the company plans to address by prioritizing debt reduction.
Performance Across Business Segments
Within BP's operational segments, the Oil Production & Operations division registered a replacement cost profit before interest and tax of $1.7 billion. After accounting for a $200 million negative impact from adjusting items, the underlying profit for this segment decreased to $2.0 billion. This decline is attributed to lower pricing realizations, shifts in production mix, and a reduced share of income from equity-accounted entities.
The Gas & Low Carbon Energy segment faced a challenging quarter, reporting a $2.2 billion replacement cost loss before interest and tax, mainly due to decreased realizations. However, following adjustments totaling $3.6 billion, the segment rebounded to an underlying profit of $1.4 billion.
BP's Customers & Products segment posted a replacement cost profit before interest and tax of $1.4 billion. Adjusting for $100 million in impacts, the underlying profit for this segment was $1.3 billion. This performance was tempered by expected seasonal volume declines and underperformance in midstream operations.
Management's Strategic Outlook
Carol Howle, who currently serves as interim chief executive officer of BP, emphasized the company's decisive efforts to enhance its portfolio and fortify its financial condition. She highlighted the $20 billion disposal program underway and the suspension of share repurchases, aiming to direct all excess cash towards debt reduction. These moves are intended to underpin long-term value creation, especially through opportunities in the upstream business, such as the promising Bumerangue discovery in Brazil, estimated to contain about 8 billion barrels of liquids in place.
Looking ahead, BP anticipates welcoming Meg O’Neill as the new CEO in April. The leadership transition is expected to accelerate the company's efforts to build a simpler, stronger, and more valuable BP in the future.
Recent Developments and Partnerships
In a notable asset management decision, BP completed the sale of a controlling interest in its Castrol lubricants business for $10.1 billion in December 2025, streamlining its portfolio in line with its strategic objectives.
Moreover, in January 2026, BP announced a joint venture with Corteva, Inc. to produce crop-based oils derived from canola, mustard, and sunflower seeds. This initiative targets sustainable aviation fuel (SAF) and renewable diesel (RD) production, marking BP's commitment to low-carbon energy solutions and collaboration within the evolving energy landscape.
Shareholder Considerations
BP declared a quarterly dividend to shareholders amounting to 8.32 cents per ordinary share. Concurrent with the suspension of share buybacks, the company withdrew its previous guidance of distributing 30% to 40% of operating cash flow to shareholders, focusing instead on deleveraging efforts to solidify its financial foundation.
Outlook for the Near and Long Term
For the first quarter of fiscal year 2026, BP expects reported upstream production to maintain levels comparable to the fourth quarter of 2025. Customer-facing businesses are likely to encounter typical seasonal reductions in volume. In the Products segment, industry refining margins are anticipated to weaken, although this impact should be partly mitigated by a decrease in refinery turnaround activities. Capital expenditures for the first quarter are projected to align with the previous quarter's spending.
Regarding the full year 2026, BP forecasts capital expenditure in the range of $13 billion to $13.5 billion. Reported upstream production is expected to experience a slight decline, while underlying upstream production should remain broadly stable relative to 2025. The company anticipates that oil production and operations will sustain flat underlying output, whereas gas and low carbon energy production is projected to decrease over the period.
Financial obligations include estimated Gulf of America settlement payments of approximately $1.6 billion pre-tax for 2026, with about $0.4 billion due in the first quarter and roughly $1.1 billion in the second quarter. BP has reiterated its objective to reduce net debt to a range of $14 billion to $18 billion by the end of 2027, affirming its commitment to bolstering financial health.
Market Reaction
Following these disclosures, BP's stock dropped by over 5% to $37.22 in premarket trading on the day of the announcement. This decline reflects investor response to the suspension of share buybacks and emphasis on debt reduction, as well as the mixed financial results and future guidance shared by the company.