British oil and gas giant BP PLC has revealed it expects to take significant financial charges of up to US$5 billion against its energy transition portfolio. This major announcement comes just weeks after a sudden leadership overhaul, signaling a pronounced strategic pivot back towards the company's core fossil fuel operations.
Leadership Shakeup Precedes Financial Reset
The writedown news follows the recent ouster of Chief Executive Murray Auchincloss. Auchincloss had been attempting to steer BP through a period marked by what the company now views as unsuccessful bets on low-carbon energy, all while facing pressure from activist investor Elliott Investment Management. New Chairman Albert Manifold indicated that changes under the previous leadership were not occurring quickly enough. He has appointed Meg O'Neill, the current CEO of Woodside Energy Group Ltd., to take the helm starting in April 2026.
In a business update ahead of its full earnings report next month, BP also flagged weak oil trading results and flat production for the fourth quarter of 2025. On a positive note, the company reported a reduction in its net debt, aided by ongoing asset sales.
Strategic Shift and Asset Sales Accelerate
The London-based major is actively divesting what it deems non-strategic assets to streamline its business and reduce leverage. While BP did not specify exactly which low-carbon assets are facing writedowns, its portfolio includes a global offshore wind joint venture with Japan's Jera Co., as well as investments in solar power, biofuels, and electric-vehicle charging infrastructure.
Analysts like Biraj Borkhataria of RBC Capital suggest more assets could be "on the chopping block." This realignment is a crucial part of BP's effort to refocus on oil and gas, underscored by a series of new field startups announced last year.
A key move in this debt-reduction strategy was December's agreement to sell a majority stake in its Castrol lubricants division to U.S. investment firm Stonepeak Partners, a deal expected to raise roughly US$6 billion. BP has stated its ambitious goal is to secure US$20 billion from asset sales by the end of 2027.
Market Pressure and Investor Payouts in Question
The combination of weak trading, flat production, and a lower oil price environment is putting pressure on BP's financial metrics and its ability to sustain its current level of shareholder returns. The writedowns could negatively impact the company's net debt-to-equity ratio, which is already the highest among the top oil majors.
This has led analysts to speculate that the "next logical step" is for BP to halt its share buyback program to allow for further debt reduction. The company's shares fell as much as 1.7% in early London trading following the update.
BP's turnaround efforts had previously shown promise, with its stock performance in 2025 nearly tying with Shell PLC as the best performer among the top five oil majors. However, that recovery began to falter in mid-November, ending the year with a 10% gain. The company now faces the challenge of lower crude prices, with the international Brent benchmark trading below the US$70-per-barrel level that BP needs to hit its financial targets.
When Meg O'Neill assumes the CEO role, she will inherit a company in the midst of this significant strategic recalibration. The substantial writedowns are seen as an effort to provide her with a cleaner financial slate, but she may immediately need to contend with how to fund investor payouts organically if oil prices remain subdued.
