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BP has told 39,000 employees that their annual cash bonus will be paid at just 45 per cent of target after a year of poor financial and operational performance.
The bonus, which is also awarded to senior leadership, is worth a maximum of 225 per cent of chief executive Murray Auchincloss’s annual salary of £1.45mn, according to the company’s annual report.
But Auchincloss, who formally took charge of BP last January, would earn a bonus of about half of his salary for 2024, one person close to the company said.
BP said on Tuesday that it had made $8.9bn in underlying profit for the full year compared with $13.8bn in 2023 — the worst annual result since it lost $5.7bn in 2020, the year the Covid-19 pandemic began.
The company’s bonus scheme is assessed 50 per cent on financial performance, 30 per cent on safety and sustainability and 20 per cent on operations.
On Tuesday, after the company posted underlying profits of $1.17bn for the last three months of 2024, about half of the total for the previous quarter, BP messaged the final calculation for the annual bonus to eligible staff, said one person close to the company.
The news of the bonus calculation was first reported by Reuters.
BP has pledged to “fundamentally reset” its strategy and improve its performance in the wake of the results and in the face of pressure from US activist investor Elliott Management, which has built a stake in the company.
While the size of Elliott’s stake is unclear, another BP shareholder said the group’s holding meant that change at the London-listed oil major was now inevitable. Auchincloss declined to comment on whether Elliott had contacted BP.
Shares were flat by late afternoon in London on Tuesday after jumping as much as 8 per cent on Monday following the disclosure of Elliott’s stake over the weekend before closing down 0.6 per cent.
Auchincloss has faced calls to set out a fresh strategy after several quarters of disappointing results, concern over the group’s aggressive push into renewables and a share price that has lagged behind rivals over the past year.
In a statement on Tuesday, Auchincloss pledged to increase “cash flow and returns” and said he would unveil “a new direction for BP” at an investor day on February 26.
“We have been reshaping our portfolio — sanctioning new major projects and focusing our low-carbon investment — and we have made strong progress in reducing costs,” he said.
He added that the company planned “to fundamentally reset our strategy and drive further improvements in performance, all in service of growing cash flow and returns”.
Investors have pushed BP to move away from its strategy under previous chief executive Bernard Looney of gradually reducing its oil production and boosting green energy.
Under Auchincloss, the group has scaled back its renewables projects and spun off its offshore wind projects into a separate joint venture.
But the biggest problem for BP in the past year was its refining business, as the margin it made on each barrel fell to $17.70 from an average of $25.80 in 2023.
Its refining and trading businesses swung from an underlying pre-tax profit of $3.8bn in 2023 to a pre-tax loss of $67mn last year. BP has since put its Gelsenkirchen refinery in Germany up for sale.
“In refining it has been a challenging year for everybody,” Auchincloss told the Financial Times. “The team is on it and we look forward to refining getting back to profitability meaningfully.”
Analysts have speculated that BP will have to cut its shareholder returns as it tries to boost its growth and pay down debt. But in the fourth quarter BP held its dividend and promised another $1.75bn of share buybacks.
In its results presentation, BP adopted US President Donald Trump’s renaming of the Gulf of Mexico, stating that the Deepwater Horizon disaster occurred in the “Gulf of America”. Fellow oil major Chevron also used the term last month.
“The United States has changed it to the Gulf of America, and so have we, along with all the competition,” said Auchincloss.
