Will FTSE 100 Energy Giant BP Finally Give Investors Some Joy?

BP logo sits on a totem sign at fuel station in Cambridge, U.K. (Photo: Jason Alden/Bloomberg)

© 2020 Bloomberg Finance LP

After a good few years of disappointment languishing in the shadows of Big Oil rivals, executive departures, costly renewables forays, rumors of a takeover and an activist investor on its back, BP (LON: BP) has finally signalled to the market and its investors that meaningful change might be on the horizon.

On Tuesday, the energy major revealed better-than-expected results for the second quarter of 2025, with an adjusted net income of $2.4 billion, down 14% year-on-year, but well above market forecasts in the $1.7-$1.9 billion range.

The announcement of an improved performance came a day after BP claimed it had made its largest oil and gas discovery in 25 years in the Santos basin, 400 km off Brazil’s east coast. It was also accompanied by a pledge from CEO Murray Auchincloss that his company “can and will do better.”

The Brazilian discovery – said to be as game changing for the company as its Shah Deniz gas field find in the Caspian Sea in 1999 – would likely help as BP continues to pull back from renewable energy moves made under Auchincloss’ scandal-ridden predecessor Bernard Looney and departing chairman Helge Lund.

Heightened Focus On Hydrocarbons

Since taking over as CEO in 2024, Auchincloss has been steadily reducing BP’s renewable energy exposure and investing in oil and gas.

The Brazil discovery, coupled with successes in Namibia, Egypt, Mauritania, Senegal, Trinidad & Tobago, and an overt desire to raise both onshore and offshore production in the U.S., are all clear signs of a return to oil and gas basics, ahead of the arrival of incoming chairman Albert Manifold.

ForbesSaudi Aramco Profit Dips For 10th Quarter In A RowBy Gaurav Sharma
ForbesShell Maintains $3.5 Billion Share Buyback Despite Dip In ProfitsBy Gaurav Sharma

ForbesWill Oil Demand Hit 123 Million Barrels Per Day By 2050 As OPEC Says?By Gaurav Sharma

He is expected to join BP’s board next month to fully replace Lund in October. The company is planning on increasing investment in its upstream oil and gas business by around 20% to $10 billion a year through to 2027 in order to “grow and strengthen” its portfolio.

“We will conduct a thorough review of our portfolio of businesses to ensure we are maximizing shareholder value moving forward – allocating capital effectively. We are also initiating a further cost review. BP can and will do better for its investors,” Auchincloss said, at the release of the latest financials.

Can Investors Breathe A Sigh Of Relief?

To provide some comfort to patient investors, BP also raised its quarterly dividend by 4% to 8.32 cents a share and will repurchase $750 million in shares before third quarter results, keeping the pace of its buyback steady.

Another reset from a reset back February is coming their way, as Auchincloss noted in an analysts’ call: “It’s time to take stock as Albert joins as a new chair, and work together on this conundrum of lots of lots of great opportunities, but you can only choose so many.”

That initial reset arrived after activist investor Elliott Investment Management revealed it had taken a near-5% stake in BP, and amid persistent rumors of a takeover approach by Shell, which was recently denied by the latter.

BP’s focus, back then as it is now, is on cost cuts too. The company said it had already achieved $1.7 billion of its $4-$5 billion cost-cutting target for 2023–27. BP’s net debt also fell by $1 billion to $26 billion, compared with a target range of $14-$18 billion by 2027.

The company’s divestment program also appears to be going well too. It has completed $3 billion in divestments towards its $3-$4 billion goal for the end of the current year.

It all seems encouraging, and valuation rewards may follow if the market sees the turnaround momentum being maintained. Following Tuesday’s uptick, BP’s share price was up by 3.3% since the start of the year, down 3.4% on an annualized basis. The intraday gains also dragged BP’s 5-year share price gains to around the 45% mark.

But by contrast, on a comparable 5-year gains basis on Tuesday, Shell’s (LON: SHEL) share price came in 133% higher, Chevron’s (NYSE: CVX) 75%, and ExxonMobil’s (LON: XOM) 146%.

That shows BP, Auchincloss and Manifold still have a lot of work to do to bridge that gap. But for the first time in years, something feels different. How it all ultimately pans out remains to be seen.

Disclaimer: The above commentary is meant to stimulate discussion based on the author’s opinion and analysis offered in a personal capacity. It is not solicitation, recommendation or investment advice to trade oil and gas stocks, futures, options or products. Energy and equity markets can be highly volatile and opinions in the sector may change instantaneously and without notice.