Global Markets Comment
BP has a robust financial proposition prioritised by a planned dividend policy, de-leverage and energy transition investment, hydrocarbon investments and share buybacks. Following deleveraging to a targeted$35bn net debt, at least 60% of surplus cashflow will be utilized in the form of share buybacks and BP expects to reach this point by end 2021/early 2022. Dividends are also planned to stay fixed at 5.25c/share. We expect vaccine news to support oil prices heading into 2021 and are positive on the energy transition BP is embarking on.
Performance since inception*
BP plc (formerly The British Petroleum Company plc and BP Amoco plc) is a British multinational oil and gas company headquartered in London, England. It is a vertically integrated company operating in all areas of the oil and gas industry, including exploration and production, refining, distribution and marketing, power generation and trading. It also has renewable energy interests in biofuels, wind power, smart grid and solar technology.
Price History 1 year
BP appears to be on track as it rolls out its strategic reset. Management expects cash earnings to grow at 5-6% CAGR from 2020-2025 while cutting capex in its hydrocarbon business to ~$9bn on average over 2020-2025 (down from $13bn in 2019). FCF will be used to fund a dividend fixed at 5.25c/share, investments in renewables and a share buyback program with 60% of FCF that will be completed by early 2022. We expect oil prices to normalize as the economy recovers from the COVID-19 pandemic which should provide support for BP’s share price
Price History 5 years
Risk in Investment Case
Key downside risks for BP are 1) lower oil prices (<$30/bbl) and benchmark spreads 2) Loss of Rosneft value where it holds around 20% stake 3) risk of large-scale industrial accidents taking place given BP’s history
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