BP Faces Triple Squeeze: Restructuring, Oil Price Collapse, and Governance Probe Weigh on Shares

BP's new CEO Meg O'Neill confronts plunging oil prices from US-Iran détente, internal restructuring into Upstream/Downstream, $2.9B Shah Deniz investment, and a fraud probe.

The peace dividend from the US-Iran détente has hammered oil markets this week, and BP is caught squarely in the blast. Brent crude tumbled roughly five percent on Tuesday to around $78.96 a barrel — its lowest since March — as the Straits of Hormuz reopened and Iran sanctions were lifted. West Texas Intermediate slid to $76.05. The agreement, which also eases restrictions on banking and insurance, has stripped out the geopolitical risk premium that had buoyed energy stocks for months. Goldman Sachs and Morgan Stanley have already slashed their oil price forecasts, with some analysts now seeing Brent hovering near $80 in the fourth quarter.

The timing could hardly be worse for BP’s new chief executive, Meg O’Neill, who took the helm in April. The first quarter delivered a stellar net profit of $3.2 billion — more than double the year-ago period — powered by the “Customers & Products” division, whose earnings surged from $103 million to $2.5 billion on volatile markets and disrupted supply chains. Adjusted earnings also came in at $3.2 billion, with operating cash flow of $2.9 billion and upstream asset utilisation hitting 95.7%. But those very conditions are now normalising, threatening to squeeze both trading and upstream margins in the quarters ahead.

O’Neill is betting on a radical internal overhaul to weather the downturn. Starting 1 July, BP will split its operations into two clear units: Upstream and Downstream. Gordon Birrell will lead Upstream, while Richard Harding takes interim charge of Downstream. The move is the company’s most direct response to a cost problem that UBS analyst Joshua Stone has described as the worst among the major oil groups — operating expenses have swollen by roughly $10 billion since 2019. A hiring freeze is already in place, new offshore wind projects have been shelved, and BP has scaled back its long-term target for reducing oil and gas output from 40% to 25% by 2030.

Alongside the internal shake-up, BP is doubling down on Azerbaijan during the Baku Energy Week. The flagship decision is a $2.9-billion final investment approval for the Shah Deniz Compression project, the third phase of development on the world-class gas field, which will tap low-pressure reserves. Additional drilling is planned at the Azeri-Chirag-Gunashli field, and two new exploration and development licences have been secured — described by BP’s regional president as a potential “multi-billion-dollar investment” in gas reserves beneath the ACG reservoir. Separately, on 1 July BP will hand over operational control of the Baku-Tbilisi-Ceyhan pipeline — which moves over a million barrels a day from the Caspian to the Mediterranean — to state-owned SOCAR. BP insists this is a contractual obligation, not a divestment.

Governance troubles are adding a further layer of uncertainty. Law firm Pomerantz is investigating possible securities fraud following the sacking of chairman Albert Manifold on 26 May over what BP called “serious concerns regarding governance standards”. That cloud is likely to hang over the stock as the probe unfolds.

The market’s verdict so far is unambiguous. BP shares closed at €5.92 on Tuesday, roughly nine percent lower than a month ago and 15% below the 52-week high of €7.01 reached in March. The stock is trading well under its 50-day moving average of €6.37, and the relative strength index of 36.7 is approaching oversold territory without yet flashing a reversal. On a more positive note, the share price remains nearly 29% above the summer trough of €4.25, and the restructuring could eventually unlock value. Of 19 analysts surveyed, nine rate BP a buy, nine a hold, and only one a sell — a consensus that still leans bullish.

BP’s ability to prove the sceptics wrong will hinge on whether the new structure delivers real cost savings. The half-year results will provide the first concrete test, and the company has already set ambitious targets: $2 billion of cuts by end-2026 and $6.5–$7.5 billion in cumulative reductions by 2027, boosted by the planned sale of its Gelsenkirchen refinery. For O’Neill, the path ahead requires threading a needle between external headwinds, internal transformation, and the lingering stain of a governance scandal — all while keeping investors convinced that the worst is priced in.