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BP has distinguished itself as the first major oil company to suspend its share buyback program, aiming to strengthen its financial standing. This strategic shift, announced on Tuesday, resulted in a noticeable drop in BP’s stock price.

By halting the buybacks, BP will conserve over $6 billion annually. However, this decision contrasts sharply with Shell’s strategy. Just last week, Shell committed to continuing its quarterly expenditure of $3.5 billion on stock repurchases.

“BP now offers a materially lower distribution yield than peers,” noted Biraj Borkhataria, an analyst at RBC Capital, in a recent report.

BP shares plunged as much as 5.5 percent in early trading in London, reaching approximately £4.55.

Although BP’s oil and gas output has stabilized following the company’s retreat from an ambitious yet unsuccessful green energy initiative, its financial situation remains uncertain.

BP said its board had concluded it now needed to suspend buybacks and “fully allocate excess cash” to strengthening the balance sheet. Its European peers TotalEnergies and Equinor have also both signalled similar moves.

Collectively, Europe’s oil majors have spent roughly half their cash flow in recent years on buying back and cancelling shares, to reduce their share count and support stock prices.

Investors often see buybacks as a tax-efficient way of returning cash to shareholders, since capital gains are often taxed at a lower rate than dividends.

Kate Thomson, BP’s chief financial officer, said the company did not expect to buy back any more shares this year and declined to say how long the suspension would last.

“Right now, I’m focused on creating the right foundation. Net debt is my first priority,” she told the FT in an interview. “A stronger balance reduces financing costs and drives higher free cash flow.”

BP’s net debt barely moved last year, standing at more than $22bn, despite pledges from management to reduce borrowing and the sale of assets worth in excess of $5.3bn. In February 2025, the company promised to cut debt to between $14bn and $18bn by 2027.

The group has also struggled to reduce its costs, with operating expenses last year only slightly lower than in 2024. Thomson said that while BP was reducing costs in some areas, it had also spent more after increasing production at its US shale business, and had inherited costs after buying out joint venture partners, such as at its Lightsource solar business.

BP also reported adjusted profits of $1.5bn in the fourth quarter, roughly in line with analysts’ expectations. It intended to trim capital spending this year to between $13bn and $13.5bn, from $14.5bn in 2024 and more than $16bn in 2023.

Ahead of the arrival of Meg O’Neill as chief executive in April, BP also wrote down the value of its green energy businesses by $3.1bn, with the impairments mainly applying to Lightsource and its biogas business, Archaea.

The price of benchmark Brent crude fell by roughly 20 per cent last year and is expected to fall further this year as more supply comes on to the market.

But so far this year, Brent has risen by more than $7 a barrel, to above $69, on concerns that a potential conflict in Iran will disrupt supplies.