BP Pauses Buybacks and Targets $4.3 Billion Hybrid Bond Reduction as New CEO Prioritizes Balance Sheet

BP's new CEO Meg O'Neill pivots from share buybacks to debt reduction, planning $4.3B hybrid bond cut by 2027, while raising dividend and selling Gelsenkirchen refinery.

BP’s new chief executive, Meg O'Neill, is wasting no time putting her stamp on the company. Despite a blockbuster first quarter that saw adjusted profit surge past analyst expectations to $3.2 billion — well above the $2.67 billion consensus — the oil major has halted its share buyback program and is instead training its sights on debt reduction.

The decision marks a clear strategic pivot. Rather than returning excess cash to shareholders through buybacks, O'Neill is directing the company's resources toward shoring up a balance sheet that came under pressure during the period. Net debt climbed to over $25 billion, with one source putting the figure at $25.3 billion, driven by a $6 billion working capital build tied to high inventory levels and volatile commodity prices.

The centerpiece of the debt-reduction strategy is a plan to slash the company's hybrid bond portfolio by $4.3 billion by the end of 2027. BP will make an initial move in the second quarter, redeeming €2.5 billion of perpetual hybrid bonds without refinancing. Management has made clear there are no plans to replace these instruments.

Gelsenkirchen Sale Sharpens Cost-Cutting Target

Operationally, BP delivered a strong performance in the first three months of the year. Upstream production averaged 2.3 million barrels of oil equivalent per day, while refinery availability exceeded 96% for the fifth consecutive quarter. Refinery throughput of more than 1.5 million barrels per day was the highest in four years.

The Customers & Products segment was a standout, with adjusted earnings before interest and taxes more than doubling from the previous quarter to $3.2 billion. The trading desk delivered what BP had flagged as an "exceptional" result, capitalizing on market dislocations stemming from Middle East tensions. Brent crude averaged above $81 a barrel during the quarter, while US natural gas prices at Henry Hub also rose sharply.

A key strategic move was the agreement to sell the Gelsenkirchen refinery to the Klesch Group. The transaction, expected to close in the second half of 2026 subject to regulatory approvals, has reshaped the company's cost targets. BP now aims for structural savings of $6.5 billion to $7.5 billion by 2027 — roughly 30% of its 2023 cost base — with the Gelsenkirchen sale alone expected to eliminate about $1 billion in annual operating expenses.

Dividend Rises Despite Buyback Pause

Shareholders are not being entirely left out. The quarterly dividend has been increased to 8.32 US cents per share, providing some compensation for the suspended buyback program. The stock has responded favorably to the strategic direction, rising around 3.5% to €6.81 in recent trading, closing in on its 52-week high of €6.88. The shares have gained roughly 34% since the start of the year, though some technical indicators suggest the rally may be overextended.

The company's operating cash flow came under pressure in the quarter, falling to $2.9 billion due to the working capital build. BP expects to generate $9 billion to $10 billion from divestments, including around $6 billion from the Castrol sale, with the bulk of those proceeds arriving in the second half of the year.

Production Headwinds Ahead

Looking to the second quarter, management is tempering expectations. BP anticipates lower upstream production due to seasonal maintenance in the Gulf of Mexico and ongoing disruptions in the Middle East. The company is maintaining its full-year capital expenditure guidance of $13 billion to $13.5 billion.

The overarching financial target remains a net debt ceiling of $18 billion by the end of 2027. For now, O'Neill is betting that a stronger balance sheet will ultimately deliver more value than a buyback program — even if it means disappointing some shareholders in the near term.