Cutting buybacks marks the most significant shift in BP’s financial framework since it halved its dividend in August 2020 following the pandemic-driven collapse in oil prices.
The move, along with other cost-cutting and divestment plans, should go a long way toward bolstering BP’s weakened finances and would better position the company to take advantage of its strong production outlook.
The timing of the buyback policy announcement suggests Chairman Albert Manifold and the board are keen to “clear the decks” ahead of the arrival of new chief executive Meg O’Neill in April, following the abrupt departure of Murray Auchincloss last December.
While this latest move was poorly received by investors, with BP shares falling by as much as 5% after the decision was announced on Tuesday, it’s a much-needed step considering the sorry shape of the British energy company’s balance sheet.
There could be wider industry implications too, if a more financially sound BP starts to attract interest from reserve-hungry rivals like Shell as a takeover target.
