British oil giant BP (BP) pledged to “fundamentally reset” its strategy as profits in its Fiscal fourth quarter slid to a four-year low, underlining the rationale of activist investor Elliott Management building a stake in the company.
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Underlying replacement cost profit slid to $1.17 billion in the fourth quarter, compared with $2.99 billion in the same period of last year. Annual profits fell to $8.92 billion from $13.84 billion in 2023, the worst performance since it lost $5.7 billion in 2020 due to the pandemic. Shares of BP in London (GB:BP) barely moved.
Weaker Refining Margins Hit BP
BP blamed the halving in profits to “weaker realized refining margins, higher impact from turnaround activity, seasonally lower customer volumes and fuels margins and higher other businesses & corporate underlying charge.”
Reported upstream production was also down 5.4%, with underlying production 2.7%, main due to declines in Egypt. Full-year underlying production fell 2.8% versus 2023.
The results come after the stock jumped on reports that activist Elliott had built a stake in the under-pressure oil major, fueling speculation of an overhaul in strategy and board changes. Elliott could press for personnel changes at the top and speeding up the divestment of non-core assets.
Specifically, investors think the firm will press BP to ditch its focus on low-carbon energy, adopted under past CEO Bernard Looney, in favour of fossil fuels.
BP CEO Pledges Fundamental Reset of Strategy
Commenting on the numbers, CEO Murray Auchincloss vowed to “fundamentally reset our strategy and drive further improvements in performance.” Strategy changes are set to be announced at a highly anticipated investor day slated for February 26th.
Under Auchincloss the process of moving away from the Looney-era strategy of reducing oil production and boosting green energy has already begun, with the company scaling back renewables and spinning off its offshore wind business. Last month BP announced a 5% cut to its global workforce as part of efforts to deliver $2 billion in cost savings by the end of 2026.
Lower average oil prices and weaker refining margins have been a problem across the industry. BP warned in January of lower fourth-quarter realized refining margins, while Chevron and Exxon Mobil also cited weaker refining margins and lower demand for finished fuel products in the U.S.
Despite the weaker operating environment, BP announced a dividend of $0.08 per share and $1.75 billion share buyback for Q4.
Looking ahead, BP expects first quarter 2025 reported upstream production to be lower than the quarter just gone and refining margins to remain low.
Is BP a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy consensus rating on BP stock, based on three Buys and six Holds. After declining almost 5% in the last 12 months the average BP price target of $36.10 implies almost 12% upside to current levels, though this figure is subject to revision post-earnings.
