BP Steps up Cost Cutting as Profits Slide

Why It Matters

The heightened cost‑cutting and leadership shift signal a tighter financial footing for BP and a renewed focus on core hydrocarbon assets, affecting investors and the broader energy transition narrative.

Key Takeaways

• BP profit falls to $7.5 bn, down 15%.
• Cost‑saving target raised to $6.5 bn by 2027.
• Share buy‑back suspended; Castrol stake sold.
• New CEO Meg O'Neill to refocus on oil.
• Debt remains around $22 bn, prompting tighter discipline.

Pulse Analysis

BP’s latest earnings underscore how volatile oil prices continue to pressure legacy producers. A 20% slump in crude prices drove 2025 profit down to $7.5 bn, marking the third consecutive year of decline after a 2022 peak of $27.7 bn. The earnings dip mirrors broader market trends, with peers like Shell also reporting double‑digit profit contractions. For analysts, the numbers highlight the fragility of earnings that are heavily tied to commodity cycles, reinforcing the need for diversified revenue streams.

In response, BP has accelerated its cost‑reduction agenda, expanding the target to $5.5‑$6.5 bn in savings by 2027. The move includes scrapping the share‑buyback programme, accelerating non‑core asset disposals, and completing the sale of a 65% stake in its Castrol lubricants business. With debt hovering around $22 bn, the firm aims to improve leverage ratios and free cash flow for future investments. These actions are designed to restore investor confidence and stabilize the balance sheet amid a low‑price environment.

Leadership change adds another layer of strategic clarity. Meg O'Neill, a former Woodside Energy head, will take the helm in April, bringing a track record of operational discipline. Her appointment signals a decisive pivot back to oil and gas, moving away from recent renewable‑energy ambitions. Market participants view the shift as both a short‑term earnings stabilizer and a long‑term gamble on the longevity of fossil‑fuel demand, making BP’s next performance a bellwether for the sector’s adaptation to energy transition pressures.

BP steps up cost cutting as profits slide

Nick Edser · Business reporter

Bloomberg via Getty Images

BP has reported a drop in annual profits and increased its target for cost‑cutting as the oil giant was hit by the fall in crude prices last year.

It reported profits of $7.5 bn (£5.5 bn) in 2025, down from $8.9 bn the year before, after the price of oil fell by about 20 %.

BP also said it was suspending its share‑buyback programme and cutting spending as it seeks to strengthen its finances.

The company has recently switched strategy away from investment in renewable‑energy projects to refocus on oil and gas operations, and new boss Meg O'Neill, who takes up her position in April, is expected to continue this trend.

O'Neill, formerly head of Australian oil and gas firm Woodside Energy, will be the first woman to run a major global oil firm.

Carol Howle, BP's current interim chief executive, said the company looked forward to O'Neill's arrival “as we accelerate our progress to build a simpler, stronger and more valuable BP for the future.”

The company has come under pressure from its shareholders for under‑performing compared with its rivals in recent years.

A year ago, BP announced it was cutting planned investments in renewable energy to spend billions of dollars more a year on its core oil and gas operations.

The energy giant is trying to cut its debts, which currently stand at about $22 bn.

Announcing its latest results, BP said it aimed to make cost savings of $5.5 bn–$6.5 bn by the end of 2027. This is an increase from its previous target of up to $5 bn, and comes after its decision to sell a 65 % stake in its Castrol business.

“Management is taking some decisive action to fix the balance sheet, scrapping the buyback, doubling down on non‑core disposals and upping structural cost‑savings targets,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

Profits in the final three months of the year fell 30 % to $1.54 bn, in a period when the price of Brent crude oil fell below $60 a barrel for the first time in more than four years.

BP's annual profits have now fallen for three years in a row. They peaked at $27.7 bn in 2022 when oil prices surged after Russia's invasion of Ukraine.

Rival oil giant Shell also announced a fall in profits when it posted its annual results last week. Shell reported underlying earnings of $18.53 bn for 2025, a 22 % decline on the previous year.

Reuters – Meg O'Neill will take up her new role in April

O'Neill takes up her new role in April.

O'Neill takes over at BP at a difficult time for the oil giant. Its previous boss, Murray Auchincloss, stepped down after less than two years in the job.

He had replaced Bernard Looney, who was dismissed by BP in 2023 after he was found to have committed “serious misconduct” in failing to disclose relationships with colleagues.

Cornelia Meyer, chief executive of Meyer Resources and a former BP executive, told the BBC that O'Neill had “a stellar track record,” and when it comes to reviving BP's fortunes, “if anybody can, she probably can.”

She added O'Neill would “instil discipline,” noting “she's an oil woman, she's not a renewables woman.”

However, BP is facing questions from some groups over its recent investment decisions.

Nick Mazan from ACCR, the shareholder‑advocacy and research organisation that has tabled the resolution, said that by halting its share buyback and continuing to invest in oil and gas, “BP doesn't appear to have shareholder interests at heart.”

“While the pivot back to oil and gas has been justified by scapegoating the low‑carbon business, our analysis shows that the upstream business has been the source of 75 % of disposal losses and impairments since 2020.”