BP hits skids as share buybacks scrapped
Shareholders are disappointed by the oil major’s decision to halt share buybacks, although City writer Graeme Evans reports that most financial numbers met forecasts.
10th February 2026 13:35
by Graeme Evans from interactive investor
BP logo at a petrol filling station in the UK. Photo: BEN STANSALL/AFP via Getty Images.
The gulf in BP (LSE:BP.) shareholder returns compared to Shell (LSE:SHEL) and the other Big Oil companies today widened after it pulled quarterly share buybacks for the first time since 2020.
Ditching a pledge to distribute around 30-40% of operating cash, BP said its priority was bolstering its balance sheet and ensuring it is positioned for longer-term growth.
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The company, whose shares yield an income of 5.7%, left its dividend policy the same after announcing plans to pay another 8.32 US cents a share on 27 March equivalent to $1.3 billion. The award is unchanged from the previous quarter and 4% higher than a year ago.
But having only recently reduced share buybacks from $1.75 billion to a quarterly rate of $750 million, BP has now paused the programme entirely.
Fewer shares in issue benefit the key metric of earnings per share and give investors a higher proportional stake in the company and future dividend distributions.
Shell recently lifted its dividend by 4% and maintained the pace of share buybacks at an industry-leading $3.5 billion - the 17th consecutive quarter of $3 billion or more.
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While lower buybacks at a time of weaker oil prices is not a huge surprise, Berenberg said removing the buyback entirely will be taken as a negative.
The City bank said today: “This decision will leave BP with the lowest total shareholder return of the major oil companies, which could be a drag on near-term performance although the free cash flow yield should remain competitive relative to peers.”
BP’s annual report for 2024 showed the company ranked sixth for total shareholder return against its seven-strong peer group of Chevron Corp (NYSE:CVX), Eni SpA (MTA:ENI), Equinor ASA ADR (NYSE:EQNR), Exxon Mobil Corp (NYSE:XOM), Repsol SA (XMAD:REP), Shell and TotalEnergies SE (EURONEXT:TTE). This follows the distribution of $5 billion to shareholders.
Berenberg said today’s buyback disappointment was offset by the focus of the BP board on lowering costs and improving the balance sheet, with net debt already $2.8 billion lower in the fourth quarter at $22.2 billion.
The company is planning to lower capital expenditure and increase cost reduction targets, while divestments should further strengthen the balance sheet.
However, Berenberg adds that BP still has the highest gearing among its peers, with the ratio of debt to equity at 23.1%.
Net debt for the quarter came in about $570 million below the City consensus as BP continues to target a figure of between $14 billion and $18 billion by the end of 2027.
Progress this year should be supported by further divestment proceeds totalling $9 billion-£10 billion, including $6 billion for its 65% stake in Castrol.
A focus on returns means annual capital expenditure is set to be at the lower end of the company’s guidance range of $13-13.5 billion.
BP said: “We believe this level of capital expenditure supports progressively growing earnings per ordinary share in the long term.”
Capital expenditure will be first-half weighted, which together with a second-half weighting for disposals will mean further pressure on cash flows in the near term.
Shares have risen 36% since April but fell 17.9p to 459.75p in today’s session, even though BP followed two sets of forecast-beating results with earnings in line with City expectations.
The impact of weaker oil and gas prices meant BP reported a 30% quarter-on-quarter drop in underlying replacement cost profit to $1.54 billion.
It also posted a positive update on BP’s giant Bumerangue discovery in Brazil, where initial estimates point to around eight billion barrels of liquids being in place at the field.
Berenberg said “While there is a wide range of uncertainty around this estimate, if this is accurate, and a 30% recovery rate is possible, that would translate into 2.4 billion barrels of recoverable reserves, before considering any gas production.”
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Today’s results are the first since December’s announcement that chief executive Murray Auchincloss had left BP after less than two years in the role.
Meg O’Neill, who has been in charge of Australia’s Woodside Energy since 2021, will become BP’s first female CEO when she takes the role in April.
Interim chief executive Carol Howle said: “We look forward to Meg O’Neill joining as CEO in April as we accelerate our progress to build a simpler, stronger and more valuable BP for the future. We are in action and we can and will do better for our shareholders.”
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