|
|
|
Good morning and welcome to Tuesday We start today with BP, which has halted its share repurchase programme and plans to cut capital expenditure, as a lower oil price prompts the UK group to shore up its balance sheet. The oil major posted adjusted profits of $1.5bn in the fourth quarter, roughly in line with a consensus prediction by analysts. Net debt at the end of 2025 stood at $22.2bn, barely down from the total for the previous year despite a pledge to reduce borrowing and more than $5bn of asset sales. BP said the board had “decided to suspend the share buyback” and would now “fully allocate excess cash” to strengthen its balance sheet, in a move expected by analysts. BP has been spending more than $7bn annually, more than a quarter of its cash flow, on repurchasing its own shares. The price of Brent crude fell by about 20 per cent last year, and is expected to fall further this year as supply increases. This year prices are up by more than $7 a barrel, to above $69, on concerns that a potential conflict in Iran will disrupt supplies. BP’s share price has risen 9 per cent this year, ahead of its main European rivals Shell and TotalEnergies, which are up 1.5 per cent and 6 per cent, respectively. However, its share price performance has lagged behind its US peers ExxonMobil and Chevron, which have risen 23 per cent and 17 per cent in the same period. Is BP on the right track? |
BP’s share price fell on the news, so it’s only now up 4% YTD. Shell is now 3% up and Total, as you say, up 6%. But YTD returns seem a very short-term way of looking at things.
Other oil majors are still returning large sums to shareholders while keeping balance sheets stronger than BP’s.
Exxon and Chevron (both up double digits ytd, for what it’s worth) have been running aggressive buybacks and offer higher overall shareholder returns, helped by stronger profitability and lower leverage, which is one reason their shares have outperformed BP’s over the recent period.
Shell and Totaln have focused on steady dividends and more predictable payouts, and investors currently see their distributions as more compelling than BP’s, whose profile has been described by some as the weakest among the “big five”.
Against that backdrop, BP’s suspension of buybacks seems to mark it out as the major under the most pressure from the current oil price environment.