BP to slash 4,700 jobs in cost-cutting measures

Energy company removing 3,000 contractor roles, as it looks to lower expenditure by at least $2 billion by next year

BP is cutting about 5 per cent of its workforce. Reuters

BP is to cut 4,700 jobs and 3,000 contractor roles, as it seeks to fulfil its plan to make $2 billion (£1.6 billion) in cost-savings by the end of 2026. The jobs represent about 5 per cent of the energy company's global workforce.

“We began a multiyear programme to simplify and focus BP last year – strengthening our competitiveness and building in resilience as we lower our costs, drive performance improvement and play to our distinctive capabilities,” BP's chief executive, Murray Auchincloss told the company's employees.

“We have got more we need to do through this year, next year and beyond, but we are making strong progress as we position BP to grow as a simpler, more focused, higher-value company.

“I understand and recognise the uncertainty this brings for everyone whose job may be at risk, and also the effect it can have on colleagues and teams.”

Chief executive of BP Murray Auchincloss said the company's cost-cutting programme was making 'making strong progress'. AFP

Last year, BP carried out an extensive review of its operations, as shareholder concerns mounted over its energy transition strategy. This week, a planned investor day scheduled for February was postponed as Mr Auchincloss was still recovering from an undisclosed medical procedure. He replaced Bernard Looney, who resigned in September 2023, after failing to disclose relationships with employees.

'Identity crisis'

BP said that Mr Auchincloss, 54, would return next month, but to “ensure his full recuperation” a capital markets day scheduled for February 11 in New York would now take place on February 26 in London. He was appointed chief executive in January last year and immediately set about scaling back BP's energy transition strategy, as investors worried it was affecting profits and the performance of the company's shares relative to its peers.

The share performance has left BP with a valuation about half that of its main competitor Shell. In addition, the company now has a stock market valuation just 10 per cent higher than EOG Resources, a 25-year company that employs 3,000 people and focuses on shale drilling in the US. BP employs about 90,000 workers.

Bank of America’s head of European energy research Christopher Kuplent describes BP as “still in an identity crisis” as the company moves back and forth between prioritising net-zero and low-carbon ventures and making profits from hydrocarbons. Under the leadership of Mr Looney, BP was moving into a greener future. He made a questionable prediction that global oil consumption had peaked, leading the company to expand its offshore wind projects.

Investors at the firm's now postponed capital markets event will be keen to see how much Mr Auchinclos is steering the company back towards concentrating on oil and gas production. Some analysts are sceptical that the company is not moving fast enough. It signalled a slowdown in its plan to reduce oil and gas output in February 2023. BP also halted a series of clean hydrogen projects and announced the spin-off of its offshore wind business.

The company has approved one major oil project since 2020 – the Kaskida field in the Gulf of Mexico. “BP will pay the price for having neglected upstream for years,” HSBC’s head of European oil and gas research Kim Fustier said. “Rebooting BP’s upstream business is a decade-long endeavour, with little that can be done to accelerate the process.”

Analysts believe if Mr Auchinclos doesn't announce some serious adjustments to BP's strategy at the end of February, there is every chance the shares could come under renewed pressure, despite their 1.2 per cent increase on Thursday as the market welcomed the news of cost-cutting. “I imagine [BP management] will do something to address the problem, but whether it’s material enough, I remain sceptical,” said Allen Good, Morningstar’s director of European oil and gas equity research. “Growth is going to be difficult.”