BP Intensifies Cost Cutting Amid Declining Profits
BP is intensifying its cost-cutting measures amid a decline in profits, with the appointment of Meg O’Neill as the new chief executive. O’Neill, previously the head of Woodside Energy, will be the first woman to lead a major global oil company. Carol Howle, BP’s interim CEO, expressed optimism regarding O’Neill’s leadership, stating that the company aims to become simpler, stronger, and more valuable.
Shareholder Pressure and Underperformance
BP has faced significant pressure from shareholders due to its underperformance compared to rivals. In response, the company announced a significant reduction in planned investments in renewable energy. Instead, BP will allocate billions to its core oil and gas operations.
Current Financial Landscape
As part of its ongoing efforts to address financial challenges, BP is working to reduce its debts, currently approximately $22 billion. The company revealed its latest financial results, aiming for cost savings between $5.5 billion and $6.5 billion by 2027. This target reflects an increase from a previous goal of up to $5 billion.
- BP plans to achieve these savings after selling a 65% stake in its Castrol business.
- Derren Nathan, head of equity research at Hargreaves Lansdown, noted the company’s decisive actions, including eliminating share buybacks and increasing structural cost-savings targets.
Profit Decline and Market Conditions
The company’s profits fell by 30% in the final quarter, amounting to $1.54 billion. This occurred as Brent crude oil prices dipped below $60 a barrel for the first time in over four years. Furthermore, BP has now experienced three consecutive years of declining annual profits, with a peak of $27.7 billion recorded in 2022, following a surge in oil prices due to geopolitical tensions.
Rival oil company Shell also reported a decline in profits, announcing a 22% reduction in its underlying earnings for the previous year. These trends reflect the broader challenges facing major oil firms as they navigate fluctuating market conditions.
O’Neill is set to assume her new role in April, just as BP seeks to reshape its future amidst these financial pressures.
