BP share price: Profits tumble to four-year low as investors eye crunch strategy update

BP’s boss has pledged to “fundamentally reset” the oil major’s strategy as annual profits dived by more than a third while the group faces pressure from an activist investor.

The FTSE 100 firm reported a 36 per cent slide in underlying replacement cost profits - the company’s preferred earnings measure - to $8.92 billion (£7.22bn) in 2024 from $13.84bn in 2023.

Fourth-quarter earnings fell by more than expected, down 61 per cent year-on-year to $1.17bn (£947 million) - the weakest result since 2020 - amid stagnant oil prices and weak oil refining margins. The quarterly earnings figures at major oil companies can be volatile.

Energy giant BP remains a key North Sea player.

On a statutory basis, BP - which remains a key North Sea player - saw replacement cost profits tumble to $750m (£607m) last year from $16.18bn in 2023. Shares were largely unchanged in morning trading after a surge on Monday.

Chief executive Murray Auchincloss said: “Building on the actions taken in the last 12 months, we now plan to fundamentally reset our strategy and drive further improvements in performance, all in service of growing cash flow and returns.”

He said it would be a “new direction for BP”, with the firm set to unveil further details at a keenly awaited strategy update on February 26. BP also said it would review its 2025 share buyback target and announce these plans as part of its capital markets day later this month.

The figures follow just days after US activist investor Elliott Investment Management was widely reported to have bought a stake in BP, which sent shares in the firm leaping higher on Monday on investor hopes it will spur a strategy rethink and board overhaul. The shares have languished in the past two years on investor concerns over a shift under previous chief executive Bernard Looney towards renewable energy.

BP's quarterly profits can be volatile as they are linked to movements in the oil price, and year-on-year fluctuations.

BP’s close Footsie rival Shell also revealed a steep profit drop when it reported at the end of last month as the sector has been knocked by weaker oil prices and lower demand for the fossil fuel, but BP’s profit woes appear more acute. BP delayed its strategy update until February 26 to allow Auchincloss to recover after a planned medical procedure.

The event will be watched closely, given the latest set of results and Elliott’s attention, with industry experts forecasting a further move away from renewable energy, which had been pursued by Auchincloss’s predecessor.

Derren Nathan, head of equity research at investment platform Hargreaves Lansdown, said: “A perfect storm of bad news dragged BP quarterly profits to a four-year low. It faced seasonal weakness, ongoing challenges at its refineries and downtime due to maintenance work.

“But the focus now shifts to the outlook. Production has been guided down, with no improvements expected for refinery downtime. Investors have been keen to see more financial discipline, especially given the tough market conditions.

“CEO Murray Auchincloss promises to unveil a new direction for BP on February 26 at the capital markets day. This will now be under the scrutiny of newly onboarded activist investor Elliott Investment Management. No doubt, they’ll be intensely questioning the returns profile on investments in both new and old technology.”

Auchincloss was appointed to the top role in January last year, having been acting chief executive since September 2023 following the surprise resignation of Looney after BP’s former boss failed to disclose his past relationships with company colleagues. It is thought that Elliott - which has not commented or disclosed the size of stake bought - could push for further divestment of clean energy business segments as part of a renewed switch back towards traditional oil and gas, mirroring others in the industry.

Auchincloss has already spun off BP’s offshore wind business in a joint venture while he is looking to offload its onshore wind arm. The group has been slashing costs in the face of tougher trading, recently announcing it will cut more than 5 per cent of its workforce with moves to axe 4,700 jobs across its global workforce and 3,000 contractor roles.

BP also said it had made “strong progress” on its aim to deliver savings of $2bn by the end of 2026, with $800m stripped out in 2024.

Mark Crouch, market analyst at eToro, noted: “Not since the pandemic has BP reported numbers this low. The company's fourth-quarter profits plummeted year-over-year, as weakening margins significantly dented the oil major’s bottom line. Despite this disappointing performance however, market attention is shifting away from the earnings themselves and focusing more on the company’s future direction.

“BP’s foray into renewable energy has not paid off, contributing to a four-year low in profits. In this context, Elliott’s investment may be seen as a lifeline for BP shareholders, who have had to bear the brunt of the company’s inconsistent strategy.

“Amid what appears to be an ongoing identity crisis for BP, Elliott, one of the world’s largest and most activist hedge funds, is likely to push for a strategic realignment. With a reputation for shaking up underperforming companies, the firm could help BP refocus on its core strengths, namely oil and gas production, and for BP's shareholders, at not a moment too soon,” he added.

Richard Hunter, head of markets at Interactive Investor, said the group appeared to be “stuck in neutral for now”, adding: “Expectations were low going into the final quarter and the full-year numbers and, unfortunately, BP has duly delivered.”

BP to axe 4,700 jobs globally amid cost-cutting drive