ATLANTA, GEORGIA (Chad Archey, Energy Analytics Institute, 26.Feb.2025) — UK energy giant bp introduced a fundamentally reset strategy, with significant capital reallocation, and plans to drive improved performance, aimed at growing free cash flow, returns and long-term shareholder value.
“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,” bp chief executive Murray Auchincloss said on 26 Feb. 2025 in an official statement on the company’s website.
The strategy aims to position bp to grow its upstream crude oil and natural gas business, focus its downstream business, and invest with increasing discipline into the transition. The reset also aims to build on bp’s distinct strengths and competitive advantages as an integrated energy company – with a “world-class portfolio with top tier oil and gas businesses in attractive basins and leading integrated positions and brands across value chains, all underpinned by trading, technology, and partnerships,” the company said.
Key highlights of the strategy reset include the following:
— Strategy fundamentally reset: the resets will focus on reducing and reallocating capital expenditure, significantly reducing costs and driving improved performance – to grow cash flow and returns – supporting a stronger balance sheet and resilient distributions;
— Growing upstream: increasing oil & gas investment to ~$10bn per annum; strengthening portfolio; growing production to 2.3–2.5 million barrels of oil equivalent (MMboe/d) in 2030; additional ~$2bn operating cash flow in 2027;
— Focusing downstream: reshaping portfolio to drive growth; high-grading and focusing on advantaged and integrated positions; announced strategic review of Castrol; driving improved performance; additional $3.5bn–$4bn operating cash flow in 2027;
— Disciplined investment in the transition: selective investment in biogas, biofuels and electric vehicle (EV) charging; capital-light partnerships in renewables; focused investment in hydrogen/CCS or carbon capture and storage; investment in transition businesses of $1.5bn–$2bn per annum, over $5bn per annum lower than previous guidance;
— Updated financial frame: reducing annual Capex to $13bn–$15bn to 2027; targeting significantly higher structural cost reductions of $4bn–$5bn by end 2027; $20bn divestments by 2027, including potential proceeds from Lightsource bp and strategic review of Castrol; reducing net debt, targeting $14bn–$18bn by end 2027; resilient shareholder distributions, guidance of 30–40% of operating cash flow; and
— Growing free cash flow and returns: targeting over 20% compound annual growth in adjusted free cash flow to 2027, and returns on average capital employed of over 16% by 2027.
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By Chad Archey reporting from Atlanta. © 2025 Energy Analytics Institute (EAI). All Rights Reserved.
