British oil giant BP reported a significant decline in fourth-quarter profits on Tuesday, primarily due to reduced refining margins. The company announced a $1.75 billion stock repurchase program while committing to a “fundamental” reevaluation of its business strategy.

BP’s underlying replacement cost profit (used as an indicator of net profit) for the fourth quarter was $1.169 billion, a notable decrease from $2.99 billion in the same timeframe last year, and slightly below an analyst projection of $1.2 billion, based on LSEG polling.

The firm explained that the 48% drop in RC profit for the quarter stemmed from “weaker realized refining margins, increased downtime from maintenance activities, seasonal declines in customer volumes and fuel margins, as well as higher charges in other businesses and corporate expenses.”

In the fourth quarter, BP’s net debt neared $23 billion, reflecting a 10% increase from the previous year. Additionally, capital expenditures (capex) totaled $3.7 billion during the October to December period, significantly lower than the $4.7 billion spent in the same quarter of the previous year.

Despite these challenges, the beleaguered energy company initiated a $1.75 billion share buyback for the fourth quarter and declared a dividend of $0.08 per ordinary share.

In a statement accompanying the financial results, CEO Murray Auchincloss highlighted that the company is “reshaping” its operations, achieving significant cost reductions and planning further transformations ahead.

“We intend to fundamentally reset our strategy to enhance performance, aiming for increased cash flow and returns. This marks a new direction for BP,” he stated.

Major oil companies have faced a shift over the past year, as crude prices fell after an initial surge following Russia’s invasion of Ukraine in 2022, alongside sanctions imposed by Western nations and the G7 on Russian oil. In a January trading update, BP indicated rising corporate expenses, reduced realized refining margins in the fourth quarter, and one-off charges associated with its bio-ethanol acquisition.

BP has generally fallen behind its competitors, with its stock declining approximately 9% over the past year, contrasting with a 6% increase in shares for Shell. The stock experienced a surge on Monday following reports that activist investor Elliott Management had acquired a stake in BP, raising speculation that the hedge fund may push the company to revise its strategies concerning its primary oil and gas operations.

There has been persistent speculation regarding BP potentially being a target for acquisition, although its valuation of £74 billion might pose significant challenges for prospective buyers.

To enhance its market position, BP has embarked on a major restructuring, which includes downsizing its leadership team under Auchincloss’s initiative to achieve at least $2 billion in cash savings by the end of 2026. Earlier this year, the company expanded its cost-reduction efforts by planning to eliminate approximately 4,700 jobs and recently announced it is seeking buyers for its Ruhr Oel GmbH refinery assets in Germany. Nonetheless, uncertainties remain about BP’s strategic direction amid its broad green energy initiatives, with the company expected to present its next strategic update on February 26.

In a note released on Friday, analysts at RBC emphasized the importance of whether BP would adjust its balance sheet by slowing its share buyback program, highlighting market expectations that the oil company would now aim for around $1 billion in buybacks each quarter, a decrease from the previously stated $1.75 billion.

“We anticipate inquiries during the upcoming conference call concerning BP’s downstream operations and how US tariffs on Canadian crude may impact the profitability of its US refineries,” the analysts pointed out, further indicating that the company’s challenges include subpar capital allocation, which has negatively affected its earning potential.