BP underwhelms, despite beating forecasts

We’ve seen a fairly benign reaction to an unremarkable set of results for BP today, the shares slipping back from 8-month highs.

Profits attributable to shareholders were higher compared to the same quarter a year ago, rising to $1.16bn from $206m but they were still substantially lower than Q2.

Year to date however the profit picture is better, to the tune of $3.5bn so the company is seeing an improvement overall, when looking at profits attributable to shareholders.

On an underlying RC profit basis, however, profits have been steady, coming in slightly higher than forecast, with capital expenditure notably lower in 2025, by more than $2bn, and cash flow also higher than expected.

Divestments in Q2 were a mere $28m, although earlier this week BP did agree a deal to divest its stakes in US Permian and Eagle Ford shale assets to Sixth Street for $1.5bn. BP has said it is looking to divest $20bn worth of assets by the end of 2027, a highly optimistic goal given that many know it is a forced seller.

The buyback was kept in place at $750m a highly questionable decision given that its gearing ticked higher to 25.1% with net debt rising to just over $26bn.

A year ago, net debt was $24.3bn so this number is going in completely the wrong direction.

It’s welcome news that BP has finally realised that the days of the Looney era were a big mistake in the transition towards renewables, however it would appear that management seem to lack the ability to take tough decisions when it comes to meeting their longer-term targets.

It is true that today’s results show some decent operational improvements but they do little to put the business on a more sustainable footing. While a suspension of the buyback may not be received well in the short term, in the longer term doing so would help to get net debt down quicker and put BP’s balance sheet on a more stable footing.

There’s plenty of evidence to show that while reducing the amount of cash available to shareholders is never a popular decision, we can see most recently in the case of HSBC, that any negative knee jerk reaction is quickly reversed if there is a longer-term vision behind the decision.

If BP truly wants to meet its reduced net debt target of $14bn to $18bn by the end of 2027, then management needs to be bolder in achieving this and not make ambitious assumptions about future cash flow from both new and existing assets.

For now, the market reaction to today’s numbers has been fairly benign, however the jury remains out as to whether Auchinloss will be given the time to finish this transition back to its core business.