On Wednesday, Bernstein analysts maintained an optimistic stance on BP (LON:BP) Plc (NYSE:BP:LN) (NYSE: BP), reiterating an Outperform rating and a price target of GBP5.70. The evaluation follows BP’s announcement of a comprehensive strategic overhaul, which analysts believe could mirror a shift similar to that of Royal Dutch Shell (LON:SHEL), focusing more on oil and gas rather than low carbon investments. According to InvestingPro data, BP appears undervalued at current levels, with the stock showing strong momentum, up nearly 17% year-to-date. The company maintains a "GOOD" overall financial health score, particularly excelling in price momentum metrics.
In the recent fourth-quarter conference call, BP’s CEO declined to comment on rumors about Elliott Management’s potential stake in the company. Analysts had predicted this strategic pivot, which was confirmed during BP’s Capital Markets Day on February 26. The new strategy is expected to involve significant changes to capital allocation and a move away from the targeted 25% production cut by 2030. InvestingPro analysis reveals that management has been aggressively buying back shares, while maintaining a 33-year streak of consistent dividend payments with a current yield of 5.5%.
The company is likely to forgo its 2030 goal of allocating half of its capital expenditures to transition engines. Among these, electric vehicle charging and hydrogen projects were still not generating positive EBITDA in 2024, while the bioenergy sector was performing poorly, despite some progress in the Archea biogas project, albeit at a slower pace than anticipated.
BP has also signaled new exploration and production final investment decisions (FIDs) for 2024, including the Kaskida project, and is pursuing deals in India and Iraq, which could potentially turn BP’s narrative into one of growth.
This strategic reset indicates a significant shift in BP’s focus, potentially altering its trajectory towards energy production and away from its previously stated green energy targets. The move could reshape the company’s future investment and operational priorities in the coming years. With an EBITDA of $31.69 billion in the last twelve months and operating with moderate debt levels, BP demonstrates solid financial fundamentals. For deeper insights into BP’s valuation and growth prospects, InvestingPro subscribers can access 12 additional exclusive ProTips and comprehensive financial analysis through the Pro Research Report.
In other recent news, BP Plc has seen significant developments. UBS analyst Henri Patricot recently raised the price target for BP to GBP5.25, maintaining a Buy rating on the shares. This adjustment anticipates a faster rate of deleveraging for the energy company and is influenced by the company’s potential for more earnings growth.
In a different development, BP is set to reduce bonuses for its senior executives to 45% of the target, following the company’s failure to meet certain financial objectives in 2024. The company’s EBITDA for 2024 was reported at $38 billion, falling short of the target of $40.9 billion.
On another note, BP is projected to invest between $20 billion and $25 billion in the redevelopment of four oil and gas fields in Kirkuk, marking a significant milestone for Iraq. This long-term commitment showcases the potential for future foreign investment in Iraq’s oil and gas sector.
Furthermore, BP has postponed its plans to produce renewable fuels at its former Kwinana oil refinery in Australia as part of the company’s wider cost-reduction efforts. Lastly, BP announced plans to cut 7,700 jobs, which includes 4,700 internal positions and 3,000 contractor jobs, as part of their strategy to reduce costs. These are among the recent developments in the company.
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