BP (BP) cut its share buyback to zero in a necessary step to slice its $60 billion debt and prioritize long-term financial health over short-term price momentum, RBC Capital Markets said a note emailed Wednesday.

The company's strong buyback activity since 2021, combined with an acquisition spree in low carbon assets, elevated its balance sheet through "a multi-year commodity super-cycle" while peers de-levered significantly, the report said.

The buyback suspension was inevitable, and now BP's total shareholder return is about half that of peers and may remain there for a while. Achieving its $14 billion to $18 billion net debt will not automatically trigger a resumption of buybacks, RBC said, citing the company's chief financial officer.

RBC said net debt needs to be lowered by $15 billion from current levels to restart buybacks. The company needs to focus on debt reduction in both 2026 and 2027. It expects buybacks to resume in 2028.

RBC said the BP's share price is likely to fall from near annual highs after the buyback cut. It sees this as part of a "kitchen sinking" exercise ahead of new Chief Executive Officer Meg O'Neill's takeover April 1.

For now, as BP offers a lower dividend than some peers, the brokerage sees better risk-reward elsewhere in the sector.

RBC maintains a sector perform rating on BP with a price target of 500 pounds ($682.6).

Shares of the company were up 4.3% in recent Wednesday trading.

Price: 38.70, Change: +1.73, Percent Change: +4.68