Oil giant warns of winter: BP suspends buybacks to preserve cash flow, low oil prices force the entire industry to contract

Huitong Finance APP News — One of the world’s largest private oil companies, BP, announced its Q4 2025 earnings on Tuesday (February 10), with profits in line with market expectations. The company also announced a pause in its share repurchase program to strengthen its balance sheet in response to sustained low crude oil prices.

During Wednesday’s Asian trading session, influenced by ongoing geopolitical risks between the U.S. and Iran, U.S. crude oil prices fluctuated and strengthened, currently trading around $64.50 per barrel, up approximately 0.8% for the day. Earlier in the trading day, oil prices experienced volatility and closed down 0.34%.

BP’s reported underlying replacement cost profit (a proxy for net profit) for Q4 2025 was $1.54 billion, exactly matching the analyst consensus compiled by LSEG of $1.54 billion. The company’s full-year net profit was $7.49 billion, slightly below analysts’ expectations of $7.58 billion, and significantly down from nearly $9 billion in 2024.

In the face of weakening commodity prices, BP’s board has decided to suspend share buybacks and allocate all excess cash toward “accelerating strengthening” of its balance sheet. The previously announced buyback program in its Q3 earnings in November was for $750 million. The suspension is viewed as a prudent measure to prioritize financial stability during a low oil price cycle.

Nevertheless, BP maintains a stable dividend policy, announcing a quarterly dividend of 8.320 cents per common share.

BP’s interim CEO Carol Howle stated in a release: “2025 is a year of strong underlying financial performance, excellent operational results, and significant strategic progress. We have made advances on our four core objectives—enhancing cash flow and returns, reducing costs, strengthening the balance sheet—but we recognize there is more work to do and understand the urgency of accelerating delivery.”

Howle emphasized that the company is in a critical transformation phase, with new CEO Meg O’Neill set to officially take over on April 1, following the departure of the previous CEO at the end of 2025.

Key Financial Highlights

• Net debt: $22.18 billion at the end of Q4, down from approximately $23 billion a year earlier.
• Operating cash flow: $7.6 billion in Q4, up from $7.43 billion in the same period last year.
• 2026 capital expenditure budget: set between $13 billion and $13.5 billion, at the lower end of previous guidance.

BP’s stock price fell nearly 4% on Tuesday, partially retracing earlier losses. Market reactions to the pause in buybacks reflect some short-term investor disappointment, but analysts generally consider the move reasonable.

Industry Context and Peer Comparison

The European oil and gas sector faces severe challenges. In 2025, oil prices experienced their largest annual decline since the pandemic, mainly due to oversupply concerns, increasing pressure on major oil companies’ shareholder return commitments.

Last week, peers Equinor and Shell reported quarterly earnings declines, citing lower crude prices among the reasons. Equinor announced a significant reduction in its 2026 share buyback plan from $5 billion last year to $1.5 billion, along with cuts to renewable and low-carbon investments. Shell maintained its buyback at $3.5 billion, continuing 17 quarters of buybacks at or above that level.

Global energy analysts commented Tuesday: “Following Auchincloss’s strategic reset in April 2025, buybacks have been reduced from $1.75 billion per quarter to $750 million. The complete cancellation indicates a more cautious stance, focusing on financial resilience. While not entirely unexpected—especially after similar actions by other oil giants—short-term investor disappointment has pressured stock prices today. However, in a weak commodity environment, prioritizing balance sheet strength is undoubtedly wise.”

Overall, BP’s performance reflects a defensive adjustment by major oil companies during a low oil price cycle: conserving cash, strengthening the balance sheet, and delaying shareholder returns for better timing. With the new CEO in place, the company is expected to further focus on upstream oil and gas operations to achieve more sustainable value growth.

Impact on Crude Oil Prices

BP’s decision to pause buybacks to withstand low oil prices demonstrates the cautious stance of oil majors amid current macroeconomic conditions. While short-term market sentiment may be affected, this financial defense measure could support the industry’s long-term resilience and has limited direct impact on crude prices, highlighting ongoing concerns over supply and demand fundamentals.

The collective reduction in capital returns by oil giants may exacerbate worries about weak demand and declining industry profitability, indirectly suppressing oil prices.

Cutting investments could impact medium- to long-term supply, but if demand recovers or geopolitical tensions escalate, oil prices may find potential support.

（US Crude Oil Continuous Daily Chart, Source: Yihuitong）

At 11:40 Beijing time, US crude oil is trading at $64.50 per barrel.