Ratings agency S&P Global on Monday revised lower BP's (BP.L) credit outlook, citing slower than expected debt reduction in a blow to CEO Murray Auchincloss who has sought to win back investor support following a turbulent year.
The agency downgraded the energy company's credit outlook to stable from positive while affirming its 'A-' long-term and 'A-2' short-term issuer credit ratings.
"BP's updated cash allocation strategy is less likely to result in meaningful further absolute debt reduction," S&P said in a statement.
A BP spokesperson declined to comment.
Auchincloss took the reins in January with a vow to take a pragmatic approach to steady the company after a bruising period that followed the abrupt resignation of predecessor Bernard Looney last September.
Auchincloss, who was head of finances under Looney, has sought to simplify BP's operations and cut costs in the face of investor doubts over plans to reduce the company's focus on oil and gas and expand a low-carbon business.
BP's net debt rose to $24 billion in the first quarter of the year, compared with $21.2 billion a year earlier. Its debt-to-capitalization ratio also rose to 22% from 19.6% over the same period.
BP, like many of its rivals, has increased shareholder returns following a surge in energy prices and profits after Russia's invasion of Ukraine in 2022.
The firm aims to allocate 80% of surplus cash towards dividend payments and share repurchases.
The shareholder return ratio "would not facilitate meaningful debt reduction, as we were previously expecting, even at the current supportive market conditions," S&P said.
Although it has made significant progress in reducing debt in recent years, BP's balance sheet remains weaker compared to rivals including Shell (SHEL.L), Chevron (CVX.N) and TotalEnergies (TTEF.PA), it added.
"The gap in terms of balance sheet strength between BP and the other supermajors will likely persist, and not narrow."
