BP has announced a major strategic reset aimed at increasing shareholder value through a fundamental reallocation of capital and enhanced performance measures. This shift marks a renewed focus on strengthening BP’s core businesses, optimizing investments, and ensuring sustainable long-term growth.

According to a press release published this Wednesday (26th), the company’s revised strategy includes a reduction and reallocation of capital expenditure, alongside significant cost-cutting measures to enhance financial efficiency. By prioritizing high-margin investments, BP aims to boost free cash flow and returns, ensuring resilience in a rapidly evolving energy market. The plan entails strengthening the upstream and downstream segments while selectively investing in transition-related businesses such as biogas, biofuels, and electric vehicle (EV) charging.

Highlights from Release:

“Together these are expected to strengthen bp’s balance sheet, increase efficiency and support higher returns.

• Reducing capital expenditure: total capex of $13–15bn p.a. to 2027 – $1–3bn lower than in 2024; expected to be ~$15bn in 2025.
• Reallocating capital expenditure to higher-growth: increasing oil & gas investment to ~$10bn p.a.; transition investment1 $1.5–2bn p.a., >$5bn p.a. lower than previous guidance.
• Reducing costs: significantly increasing target to $4–5bn of structural cost reductions2 by end 2027.
• New divestments: targeting $20bn announced by end 2027; proceeds from strategic review of Castrol and bringing partner into Lightsource bp to be dedicated to strengthening balance sheet.
• Reducing net debt: over time, targeting a range of $14–18bn by end 2027.
• Distributions: guidance of 30–40% of operating cash flow to shareholders, over time, through share buybacks3 and a resilient dividend – which is expected to increase by at least 4% per ordinary share a year, subject to board discretion4. Share buybacks are expected to be announced at time of quarterly results. Subject to board approval, bp expects the share buyback for 1Q 2025 to be $0.75-1.0bn.”

A major focus of BP’s new direction is increasing its investment in oil and gas to approximately$10 Billion. The company plans to grow production to between 2.3 and 2.5 million barrels of oil equivalent per day (mmboed) by 2030, while also strengthening its portfolio. This expansion is expected to generate an additional $2 billion in operating cash flow by 2027, supporting BP’s goal of higher financial returns and a stronger balance sheet.

In its downstream segment, BP is reshaping its portfolio to drive profitability and efficiency. A strategic review of its Castrol brand has been announced, and efforts to high-grade and focus on advantaged positions will be a priority. These measures aim to generate an additional $3.5 to $4 billion in operating cash flow by 2027, further supporting the company’s financial stability and shareholder distributions.

BP’s disciplined approach to energy transition investments reflects a more selective strategy, with a capital expenditure of $1.5 to $2 billion per year — over $5 billion lower than previous guidance. Investments will concentrate on high-return opportunities in biogas, biofuels, and EV charging, while leveraging capital-light partnerships in renewables. Hydrogen and carbon capture initiatives will remain in focus but will be pursued in a highly targeted manner.

BP’s Chief Executive, Murray Auchincloss, emphasized the significance of this reset: “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. We will grow upstream investment and production to allow us to produce high-margin energy for years to come. We will focus our downstream on markets where we have leading integrated positions. And we will be very selective in our investment in the transition, including through innovative capital-light platforms. This is a reset BP, with an unwavering focus on growing long-term shareholder value.”

With a commitment to long-term financial resilience, BP has set ambitious financial targets, including reducing net debt to between $14 and $18 billion by 2027. The company also aims for a greater than 20% compound annual growth in adjusted free cash flow and returns exceeding 16% on average capital employed by 2027. These measures are designed to enhance BP’s ability to provide resilient shareholder distributions, including share buybacks and steady dividend growth, reinforcing its commitment to financial discipline and sustainable value creation.