British oil giant BP on February 10 posted a drop in annual profits and suspended share buybacks, seeking to cut costs as the UK company was hit by the fall in crude oil prices last year.
“2025 was a year of strong underlying financial results, strong operational performance, and meaningful strategic progress. We have made progress against our four primary targets – growing cash flow and returns, reducing costs, and strengthening the balance sheet – but know there is more work to be done, and we are clear on the urgency to deliver,” Carol Howle, interim BP’s Chief Executive Officer, said in a statement.
She stressed that BP continues to put an emphasis on capital discipline and returns. “We are reducing capital expenditure for 2026 to the lower end of the guidance range, while continuing to drive down our cost base. We are also taking decisive action to high-grade our portfolio and strengthen our company, including the execution of our $20 billion disposal program and the decision to suspend the share buyback and fully allocate excess cash to our balance sheet,” she added.
These decisions position BP to progress long term value growth through the distinctive opportunity set the company is creating in its upstream business, including the Bumerangue discovery in Brazil, where BP’s initial estimates indicate around 8 billion barrels of liquids are in place, she 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,” Howle said.
Underlying replacement cost (RC) profit for the quarter of $1.5 billion, compared with $2.2 billion for the previous quarter, BP said in a press release. Compared with the third quarter 2025, the underlying result reflects lower upstream realizations, adverse impact of upstream production mix, lower refinery throughputs due to higher turnaround activity and the temporary impact of reduced capacity following an outage at the Whiting refinery and seasonally lower customer volumes, partly offset by lower exploration write-offs.
The underlying effective tax rate (ETR) in the quarter was 43 percent, compared with 39 percent for the previous quarter, which reflects changes in the geographical mix of profits.
Reported loss for the quarter was $3.4 billion, compared with a profit of $1.2 billion for the third quarter of 2025. The reported result for the fourth quarter is adjusted for inventory holding loss of $0.7 billion (net of tax) and a net adverse impact of adjusting items of $4.3 billion (net of tax) to derive the underlying RC profit. Adjusting items include post-tax net impairments and impairments in equity-accounted entities of around $4 billion, primarily related to our transition businesses in the gas and low carbon energy segment
Segment results
Gas & low carbon energy: The RC loss before interest and tax for the fourth quarter of 2025 was $2.2 billion, compared with a profit of $1.1 billion for the previous quarter. After adjusting RC loss before interest and tax for a net adverse impact of adjusting items of $3.6 billion as discussed above, the underlying RC profit before interest and tax for the fourth quarter was $1.4 billion, compared with $1.5 billion in the third quarter 2025. The fourth quarter underlying result before interest and tax reflects lower realizations. The gas marketing and trading result was average.
Oil production & operations: The RC profit before interest and tax for the fourth quarter 2025 was $1.7 billion, compared with $2.1 billion for the previous quarter. After adjusting RC profit before interest and tax for a net adverse impact of adjusting items of $0.2 billion, the underlying RC profit before interest and tax for the fourth quarter was $2.0 billion, compared with $2.3 billion in the third quarter 2025. The fourth quarter underlying result before interest and tax reflects lower realizations, the impact of production mix, and a lower share of net income of equity-accounted entities, partly offset by lower exploration write-offs.
Customers & products: The RC profit before interest and tax for the fourth quarter 2025 was $1.4 billion, compared with $1.6 billion for the previous quarter. After adjusting RC profit before interest and tax for a net favorable impact of adjusting items of $0.1 billion, the underlying RC profit before interest and tax (underlying result) for the fourth quarter was $1.3 billion, compared with $1.7 billion in the third quarter 2025. The customers fourth quarter underlying result was lower by $0.3 billion, reflecting seasonally lower volumes and a weaker midstream performance. Fuels margins were broadly flat compared with the third quarter. The products fourth quarter underlying result was lower by $0.1 billion. Stronger realized refining margins were offset by the impacts of lower throughputs as a result of higher turnaround activity and the temporary impact of reduced capacity following an outage at the Whiting refinery. The oil trading contribution was weak.
Operating cash flow for the quarter of $7.6 billion includes a $0.9 billion working capital release (after adjusting inventory holding losses, fair value accounting effects and other adjusting items) and was around $0.2 billion lower than the previous quarter reflecting lower underlying earnings, partly offset by lower cash taxes paid. Net debt reduced to $22.2 billion in the fourth quarter primarily driven by the impact of proceeds from divestments of around $3.6 billion partly offset by the $0.6 billion deferred payment for the BP Bunge Bioenergia acquisition.
Accelerating the pace of strengthening the balance sheet
“Our first capital allocation priority is a resilient dividend, which is expected to increase by at least 4 percent per ordinary share a year. For the fourth quarter, BP has announced a dividend per ordinary share of 8.320 cents,” the British oil giant said.
“We are committed to strengthening the balance sheet and continue to target improving our credit metrics within an ‘A’ grade credit range. We reiterate our primary target of $14 to $18 billion of net debt by end 2027. When considering our capital structure, we also look at other obligations including hybrid bonds, leases and our Gulf of America settlement liabilities. The board has decided to suspend share buybacks, allocate excess cash* to strengthen the balance sheet and accordingly, the guidance for shareholder distributions to be around 30-40 percent of operating cash flow is now retired,” BP said, adding, “Reflecting our continued emphasis on capital efficiency, discipline and returns, we have set our 2026 capital expenditure* budget in the range of $13-$13.5 billion. We believe this level of capital expenditure supports progressively growing earnings per ordinary share in the long term.”