bp announces strategic reset to boost cash flow and shareholder value

LONDON - BP (NYSE:BP) Plc has unveiled a significant strategic shift, aiming to enhance cash flow and shareholder returns by reallocating capital expenditure, increasing cost efficiency, and improving overall performance. The company’s new direction, announced on February 26, 2025, focuses on growing its upstream oil and gas investments to approximately $10 billion per annum, reshaping its downstream operations, and adopting a disciplined approach to investments in energy transition.

The oil giant plans to reduce its annual capital expenditures to between $13 and $15 billion by 2027, which includes divesting $20 billion by the same year. These divestments will include potential proceeds from the strategic review of Castrol and a partnership in Lightsource bp. The strategy also targets a net debt range of $14 to $18 billion by the end of 2027.

BP’s chief executive, Murray Auchincloss, stated, "Today we have fundamentally reset bp’s strategy. We are reducing and reallocating capital expenditure to our highest-returning businesses to drive growth, and relentlessly pursuing performance improvements and cost efficiency. This is all in service of sustainably growing cash flow and returns."

The company expects to achieve more than a 20% compound annual growth in adjusted free cash flow and a return on average capital employed of over 16% by 2027. BP also anticipates growing its oil and gas production to between 2.3 and 2.5 million barrels of oil equivalent per day (mmboed) by 2030, contributing to an additional ~$2 billion in operating cash flow by 2027.

In the downstream sector, BP aims to increase operating cash flow by $3.5 to $4 billion by 2027 through portfolio high-grading and focusing on advantaged and integrated positions. The strategic review of Castrol and focused investment in EV charging and biofuels are part of this reshaping effort.

Regarding the energy transition, BP plans to invest selectively in biogas, biofuels, and EV charging infrastructure. The company has reduced its investment in transition businesses to $1.5 to $2 billion per annum, which is over $5 billion per year lower than previous guidance. This disciplined investment approach includes capital-light partnerships in renewables and focused investment in hydrogen and carbon capture storage (CCS).

BP’s chair, Helge Lund, expressed confidence in the new strategy, saying, "The board believes that this is an important strategic reset for bp and is confident that it, together with rigorous performance management, will deliver improved performance and sustainable value for bp’s shareholders."

The company has also updated its sustainability goals, with a focus on reducing operational emissions by 45-50% against its 2019 baseline by 2030. The revised strategy is based on a press release statement and aims to position BP for long-term success in a changing energy market.

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