Iranian limbo lingers

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Hello Power Up readers,

Oil executives and traders gathered in London for the annual International Energy Week were on tenterhooks over the ongoing U.S-Iranian standoff. For now, diplomacy seems to be President Donald Trump's preferred approach, though the U.S. military continues its build-up in the Middle East. Until some clarity is provided, oil prices will likely remain volatile and closer to their current levels of around $70 a barrel.

Moving over to corporate news, on Tuesday, BP surprised many in the market (though not us!) by scrapping its share buyback programme in a bid to repair its weak balance sheet. The move will allow the beleaguered British oil giant to focus on reducing debt and prioritising its oil and gas production operations, which could potentially generate a lot of growth in the coming years.

The rich oil and gas resources could make BP an increasingly attractive acquisition target for resource-hungry rivals like Shell. More on this below.

Here are a few more headlines:

As always, don't hesitate to contact me at ron.bousso@thomsonreuters.com or follow me on LinkedIn with any questions or thoughts.

Cutting buybacks marks the most significant shift in BP's financial framework since it halved its dividend in August 2020 following the pandemic-driven collapse in oil prices.

The move, along with other cost-cutting and divestment plans, should go a long way toward bolstering BP's weakened finances and would better position the company to take advantage of its strong production outlook.

The timing of the buyback policy announcement suggests Chairman Albert Manifold and the board are keen to "clear the decks" ahead of the arrival of new chief executive Meg O'Neill in April, following the abrupt departure of Murray Auchincloss last December.

While this latest move was poorly received by investors, with BP shares falling by as much as 5% after the decision was announced on Tuesday, it's a much-needed step considering the sorry shape of the British energy company's balance sheet.

There could be wider industry implications too, if a more financially sound BP starts to attract interest from reserve-hungry rivals like Shell as a takeover target.

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