BP reports $2bn Q4 2024 loss amid strategic overhaul and low-carbon push

BP p.l.c. faced a challenging fourth quarter in 2024, reporting a loss of $2 billion, a stark contrast to the $371 million profit recorded in the same period in 2023. This significant downturn highlights the financial pressures facing the energy giant as it navigates volatile markets, asset impairments, and its ongoing transition toward a low-carbon future. Despite these setbacks, BP remains committed to reshaping its portfolio, reducing costs, and driving growth through strategic investments in renewable energy and carbon capture technologies.

Why Did BP Report a $2 Billion Loss in Q4 2024?

BP’s financial performance in the fourth quarter was impacted by several factors, with weaker refining margins, higher turnaround costs, and seasonally lower customer volumes contributing to the decline. The company’s underlying replacement cost (RC) profit—a key industry metric—fell to $1.2 billion, down from $3 billion in Q4 2023. This drop reflects not only reduced oil trading contributions and weaker gas marketing performance but also the adverse effects of asset impairments and fair value accounting adjustments. The company reported adjusting items with a net adverse pre-tax impact of $3.4 billion, including $1.5 billion in asset impairments and $1 billion in adverse fair value accounting effects. These adjustments significantly affected BP’s bottom line, pushing the company into the red for the quarter. Additionally, the effective tax rate (ETR) surged to 49% in Q4, driven by shifts in the geographical mix of profits, further exacerbating the financial strain.

Despite the quarterly loss, BP’s full-year 2024 results showed an underlying RC profit of $8.9 billion, down from $13.8 billion in 2023, reflecting the broader challenges in the energy sector amid fluctuating commodity prices and geopolitical uncertainties. BP’s operating cash flow also declined to $27.3 billion for the year, compared to $32 billion in 2023, while capital expenditure remained steady at $16.2 billion. This financial performance underscores the company’s exposure to global market dynamics and the impact of strategic shifts in its business model.

How Is BP Reshaping Its Business Strategy Amid Financial Challenges?

BP’s response to these financial setbacks has been a strategic pivot focused on cost reduction, portfolio optimisation, and growth in low-carbon energy. The company has already achieved $0.8 billion in structural cost reductions in 2024 and aims to deliver at least $2 billion in savings by the end of 2026 compared to 2023 levels. These cost-cutting measures are part of a broader effort to enhance operational efficiency and strengthen BP’s financial resilience in the face of market volatility.

A key part of BP’s transformation involves divesting non-core assets while investing in high-growth, low-carbon projects. In 2024, BP completed the sale of its Türkiye ground fuels business and announced plans to divest additional assets in Egypt and Trinidad. These moves are designed to streamline operations, reduce debt, and free up capital for investments in renewable energy and carbon capture technologies. BP’s strategic focus also includes expanding its presence in the renewable energy sector. The company’s renewables pipeline grew to 60.6 GW in 2024, boosted by the acquisition of Lightsource BP. This growth aligns with BP’s ambition to become a leader in the global energy transition, with significant investments in offshore wind, hydrogen, and carbon capture projects.

BP’s leadership acknowledges that these strategic shifts are not without risks, particularly given the capital-intensive nature of renewable energy projects and the uncertainties surrounding global energy demand. However, the company remains confident that its diversified portfolio and disciplined capital allocation will support sustainable growth over the long term.

What Are BP’s Key Growth Initiatives in Low-Carbon Energy?

BP’s commitment to a low-carbon future is evident in its strategic investments across multiple renewable energy projects. In 2024, the company made significant progress in expanding its clean energy footprint. One of the most notable developments was the final investment decision on the $7 billion Tangguh Carbon Capture, Utilisation, and Storage (CCUS) project in Indonesia, the country’s first large-scale CCUS initiative. This project is expected to unlock around 3 trillion cubic feet of additional gas resources, positioning BP as a leader in carbon capture technology in Southeast Asia.

BP also formed Arcius Energy, a joint venture with ADNOC‘s international energy investment company XRG, focusing on expanding gas operations in Egypt. This partnership is part of BP’s strategy to leverage synergies with global energy players and enhance its presence in high-potential markets. In addition, BP secured a technical services agreement with India’s Oil and Natural Gas Corporation (ONGC), supporting the largest offshore oil field in India, which contributes approximately 25% of the country’s oil production.

In the renewable sector, BP established JERA Nex BP, a joint venture with JERA Co., Inc., targeting 13 GW of offshore wind capacity. This collaboration is expected to accelerate BP’s growth in the offshore wind market, particularly in Asia and Europe. The company also launched the Lingen Green Hydrogen project in Germany, BP’s largest green hydrogen facility to date, with the potential to produce up to 11,000 tonnes of green hydrogen annually. These initiatives underscore BP’s strategy to diversify its energy portfolio and reduce its carbon footprint, positioning the company as a key player in the global energy transition.

BP’s efforts in low-carbon energy are complemented by its investments in energy storage, electric vehicle charging infrastructure, and biofuels. The company’s integrated approach to the energy transition aims to create value across the entire energy value chain, from production to consumption.

What Is BP’s Financial Outlook for 2025?

Looking ahead to 2025, BP expects lower reported upstream production due to the completion of divestments in Egypt and Trinidad, coupled with natural base declines. Despite this, the company anticipates stable refining margins and earnings growth, supported by ongoing cost reduction initiatives and increased contributions from new projects. BP plans to execute an additional $1.75 billion share buyback prior to its first-quarter 2025 results, reflecting its continued focus on shareholder returns.

The company’s net debt stood at $23 billion at the end of 2024, slightly higher than the previous year, primarily due to acquisitions and capital investments. BP remains committed to maintaining a strong balance sheet and improving its credit metrics within an ‘A’ grade credit range. The company also expects divestment proceeds of around $3 billion in 2025, with a significant portion expected in the second half of the year.

BP’s leadership, under CEO Murray Auchincloss, is set to unveil a new strategic direction at the upcoming Capital Markets Update on 26 February 2025. The company aims to reset its financial framework, focusing on improving cash flow, strengthening the balance sheet, and driving long-term shareholder value. BP’s updated strategy will likely address the evolving energy landscape, with an emphasis on sustainability, digital transformation, and operational excellence.

BP’s Path Forward

BP’s $2 billion loss in Q4 2024 reflects the complex challenges facing traditional energy companies amid global market volatility and the transition to cleaner energy sources. However, the company’s proactive steps to reduce costs, optimise its portfolio, and invest in renewable energy demonstrate a clear commitment to long-term growth and sustainability. While the near-term financial outlook remains cautious, BP’s strategic initiatives in low-carbon energy, coupled with disciplined capital management, position the company for a more resilient and diversified future. As the energy landscape continues to evolve, BP’s ability to adapt and innovate will be critical to its success in the years ahead.