ii view: BP shares recover while strategy revamp continues

Second-quarter results to 30 June

• Underlying replacement cost profit down 14% from a year ago to $2.4 billion (£1.8 billion)
• Quarterly dividend payment up 4% from Q1 to 8.32 US cents per share
• Maintaining a quarterly share buyback programme of $750 million
• Net debt up 15% from a year ago to $26 billion (£19.5 billion)

Guidance:

• Targeting cost savings of up to $5 billion by the end of 2027
• Targeting net debt of between $14 billion and $18 billion by the end of 2027

Chief executive Murray Auchincloss said:

"We reaffirm our commitment to ensure that there is an embedded process of continuous business improvement across our operations. This is all in service of accelerating the delivery of our strategy. bp can and will do better for its investors."

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ii round-up:

Started in 1908, oil major BP (LSE:BP.) today operates across three divisions. 

Oil production and operations account for its core hydrocarbon operations. Customer and products bring together its Castrol lubricants, aviation fuelling, and retail forecourt or ‎convenience sites. 

The gas and low carbon energy division combines the group’s upstream gas, marketing and gas trading operations with low and zero carbon energy production.

For a round-up of these latest results announced on 5 August, please click here.

ii view:

Headquartered in the UK, BP began a major industry consolidation phase when it merged with Amoco in 1998. Today it operates in more than 60 countries with most of its exploration and production coming from the US, North Africa, the Middle East and Latin America. Oil production and operations generates most profits at close to half, followed by gas and low carbon at around a third and customer and products the balance of almost a fifth.  

For investors, a changed strategy under CEO Murray Auchincloss with an emphasis to reduce net debt has seen share buybacks decline to $750 million from a previous $1.5 billion. A refocus back toward fossil fuels and away from renewable or low carbon options is unlikely to please all investors given ongoing climate change concerns. Worries about reduced energy demand under a less cooperative global trade environment persist, while a forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. 

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On the upside, BP made 10 exploration discoveries during the first half of 2025 as well a more recent major find off the coast of Brazil, helped by improved seismic quality and subsurface visualisation technology. Structural cost savings of $1.7 billion have been made since early 2024, with up to $5 billion targeted by the end of 2027, and a further review of costs now being promised. Potential business disposals, including its Castrol business, could help reduce group debt, while shareholder returns are not being forgotten given a near-term focus on the dividend and a policy to increase the payment by at least 4% a year.

For now, potentially reduced profits given possible business disposals offer caution. That said, the shares have staged a strong recovery from the Liberation Day low at the start of April, and a forecast dividend yield of around 5.6% looks to be rewarding investors to stick with BP during the ongoing strategy revamp.     

Positives: 

• Diversity of operations
• Pursuing cost savings 

Negatives:

• Climate change concerns  
• Uncertain economic outlook

The average rating of stock market analysts:

Strong hold