In a significant blow to BP's recovery efforts, ratings agency S&P Global announced a downward revision of the energy giant's credit outlook. CEO Murray Auchincloss, who has been navigating a turbulent period since assuming leadership, faces renewed investor pressure as the agency cited slower-than-expected debt reduction as the reason for the downgrade.

S&P Global adjusted BP's credit outlook from positive to stable while affirming its 'A-' long-term and 'A-2' short-term issuer credit ratings. The agency expressed concerns over BP's updated cash allocation strategy, stating it is "less likely to result in meaningful further absolute debt reduction."

Since taking over in January, Auchincloss has been steering BP through a challenging landscape, aiming to stabilize the company after the abrupt departure of his predecessor, Bernard Looney. Under Auchincloss's leadership, BP has pursued a strategy to streamline operations and reduce costs amid investor skepticism regarding the company's transition away from traditional oil and gas towards a low-carbon future.

However, BP's first-quarter financials revealed a rise in net debt to $24 billion, up from $21.2 billion the previous year. The debt-to-capitalization ratio also increased to 22%, highlighting the ongoing financial challenges the company faces.

Despite a surge in energy prices and profits following geopolitical events such as Russia's invasion of Ukraine in 2022, BP's approach to shareholder returns has come under scrutiny. The firm aims to allocate 80% of surplus cash towards dividend payments and share repurchases, a strategy criticized by S&P Global for its potential lack of significant debt reduction.

While BP has made strides in reducing debt in recent years, S&P Global noted that its balance sheet still lags behind competitors like Shell, Chevron, and TotalEnergies. The agency warned that the gap in balance sheet strength between BP and its rivals is likely to persist, posing ongoing challenges for Auchincloss and his team.

A BP spokesperson declined to comment on S&P Global's revised outlook, leaving investors and industry analysts to ponder the implications for the energy giant's future trajectory.