The financial report for British Petroleum was released on Monday, revealing a net income drop to $8.9bn, down from $13.8bn the previous year, reports Zahra Jawad
British Petroleum reported a net loss of approximately $1.96 billion for its shareholders.
However, according to the Financial Times, the company still generated $8.9 billion in underlying profits for the entire year, with $13.8 billion earned in 2023.
This marks BP’s worst annual performance since 2020 when it recorded a $5.7 billion loss due to the economic downturn caused by the COVID-19 pandemic.
The company experienced a sharp decline in Replacement Cost Profits, dropping from $16.2 billion to $750 million for the year, indicating lower refining margins and weaker trading performance, with shares languishing over the past few years.
Despite its share price increasing by 8% after Elliott Investment Management took a stake in the FTSE oil giants, experts remain wary of how BP plans to bounce back following its profit slump.
We now plan to fundamentally reset our strategy and drive further improvements in performance, all in service of growing cash flow and returns. It will be a new direction for BP- Murray Auchincloss, CEO
Following the disclosure of the financial report, CEO Murray Auchincloss made a statement reassuring a change in strategy with promises of sanctioning new projects and focusing on low-carbon investment.
Yet, despite Auchincloss’s promise to thrust BP into the arena of clean energy, the oil giant scaled back its renewable expansion in late 2024, with Reuters reporting that it abandoned its target to cut oil and gas production by 25%, signalling a strategic shift back toward fossil fuel.
This marks a reversal of the strategy set by CEO Bernard Looney’s then chief executive of BP, to aggressively set out a plan to drive the oil major to reach net zero by 2050.
BP’s financial strain will lead to further cost-cutting measures, as promised by Kate Thomson, BP’s Chief Financial Officer (CFO), in its Fourth Quarter and Full Year 2024 Financial Report.
She states that BP is set to target and deliver at least $2 billion in savings by the end of 2026 and a $0.8 billion structural cost reduction to strengthen the company’s balance sheets.
This statement already carries weight as it was announced in January this year that BP was to cut 4,700 jobs and 3,000 contractors from its entire global workforce, catalysing the cost-cutting agenda.
BP is set to release a more detailed statement on its new strategic outline on February 26th.
According to the BBC, the company is expected to scale back its commitment to renewable energy further.
BP has committed to expanding its oil and gas operations with ambitious project pledges in 2024, these included plans to produce 80,000 barrels of oil per day by 2029 from the Kaskida oil fields and the redevelopment of multiple oil fields in Kirkuk, Iraq.
The initiatives are just one of BP’s broader efforts to enhance production capacity within the oil and gas sector.
In a statement accompanying the results, CEO Murray Auchincloss said the company has been “reshaping” its portfolio with “strong progress” in cutting costs and a planned further overhaul ahead.
“We now plan to fundamentally reset our strategy and drive further improvements in performance, all in service of growing cash flow and returns. It will be a new direction for BP,” he said.
Oil majors have weathered a turn in tide over the past year, as crude prices retreated after initial support following Russia’s 2022 invasion of Ukraine and Western and G7 sanctions against Moscow’s barrels. In a January trading update, BP flagged higher corporate costs, lower fourth-quarter realised refining margins and one-off charges linked to its bio-ethanol acquisition.
BP has broadly underperformed its peers, with shares falling roughly 9% over the last year to the end of last week — compared with 6% gains for Shell.
The stock gained ground on Monday, following weekend reports that activist investor Elliott Management has built a stake in the struggling oil major, fueling speculation that the influential hedge fund could pressure the energy company to shift gears on its core oil and gas businesses.
