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BP Stock Gains 40.6% in a Year: Should You Bet on the Stock Now?
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Key Takeaways
BP shares have gained 40.6% in a year, while Q3 earnings surged 283.5% on stronger trading and margins.
BP is streamlining its portfolio and targeting an $18 billion cost base by 2027 to strengthen profitability.
BP's upstream investments and strategic partnerships support growth, while its valuation signals a discount.
BP plc (BP - Free Report) is an integrated energy major, involved in exploration and production activities, downstream operations and oil and gas trading. In the third quarter, the company reported earnings of $3.26 per American Depositary Share (ADS), up 283.5% year over year. Higher upstream realizations and refining margins, along with a significantly higher oil trading contribution, lifted its results. BP’s strategy has shifted toward simplifying its operations and generating increased shareholder value.
Over the past year, BP stock has rallied 40.6% compared with the industry’s 55.6% growth. Its peers, Shell plc (SHEL - Free Report) and Chevron Corporation (CVX - Free Report) , have risen 46% and 48.4%, respectively, during the same time frame. While price performance indicates a stock's attractiveness to some extent, it would be wiser to closely examine the company’s current business environment before offering any investment advice.
Image Source: Zacks Investment Research
Portfolio Restructuring to Improve BP’s Competitive Position
BP is simplifying its asset portfolio to focus on businesses that are more profitable, offer competitive returns and enhance shareholder value. Management had previously mentioned that it planned to conduct a company-wide review of its asset portfolio to identify and dispose of assets that do not fit its strategic objectives or dilute margins. This initiative is aimed at improving the quality of its earnings and cash flow over the long term. BP’s sale of the Gelsenkirchen refinery and the agreed sale of the Austrian mobility and convenience business are part of this broader objective. The company also agreed to exit its stake in Bay du Nord in Canada.
The company also plans to market the North Sea and Archaea businesses, simplifying its even further. BP does not view the divestment of non-core assets merely as a cost-cutting exercise but rather as a way to make the business more competitive, strengthen cash flow generation and enhance shareholder value.
Image Source: BP plc
BP’s Exploration Investments to Support Future Growth
BP’s exploration successes have emerged as one of the key growth catalysts for the company. The company continues to invest in building a multi-year upstream project pipeline that includes exploration and production opportunities across Brazil, the Gulf of America, Trinidad and Tobago and Venezuela. Notably, BP has signed an agreement with Venezuela to advance offshore gas development. The company has won an exploration and production license for the Loran Phase 2 offshore gas development, which is estimated to hold approximately 4 trillion cubic feet of recoverable gas resources.Further, the company has acquired a 70% interest in the Calypso gas project in Trinidad and Tobago from Woodside Energy, increasing its ownership in the project to 100%.
Additionally, BP has de-risked its exploration and production prospects in several existing projects across Brazil, Iraq and the U.S. Gulf by bringing in new partners. This enables BP to maintain meaningful economic exposure to the project while reducing exploration risk and sharing capital requirements. BP is prioritizing the addition of new upstream opportunities to its portfolio to counter natural production declines and strengthen the long-term outlook for its oil and gas business.
Structural Cost Reductions to Strengthen BP’s Profitability
BP is also focused on structural cost reductions to improve profitability and make the business more competitive. In its latest earnings call, management highlighted that the company has delivered $4 billion in structural cost reductions since 2023. The company continues to prioritize cost efficiencies and operational improvements to lower its structural cost base. In fact, management has expressed confidence in achieving an absolute cost base of around $18 billion by 2027. Structural cost reductions and stronger operational efficiencies can help the company achieve greater financial resilience and support sustainable returns, particularly during weaker commodity cycles.
Valuation Snapshot
The valuation snapshot indicates that BP is currently trading at a discount compared to the industry. This is reflected in its trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 2.40X compared with the broader industry average of 6.38X. However, it is currently trading cheaper compared to its peers, SHEL and CVX, which are trading at 4.18X and 7.28X trailing 12-month EV/EBITDA, respectively.
Image Source: Zacks Investment Research
Is It the Right Time to Bet on the Stock?
The current strength in oil and gas is extremely favorable for BP’s growing upstream operations. The integrated major should also benefit from stronger refining margins driven by the tightness in refined product markets and energy market volatility. BP is focused on improving its competitive position through portfolio simplification and structural cost reductions. In addition, new exploration opportunities and strategic partnerships should support its long-term production growth.
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Image: Bigstock
BP Stock Gains 40.6% in a Year: Should You Bet on the Stock Now?
Key Takeaways
BP plc (BP - Free Report) is an integrated energy major, involved in exploration and production activities, downstream operations and oil and gas trading. In the third quarter, the company reported earnings of $3.26 per American Depositary Share (ADS), up 283.5% year over year. Higher upstream realizations and refining margins, along with a significantly higher oil trading contribution, lifted its results. BP’s strategy has shifted toward simplifying its operations and generating increased shareholder value.
Over the past year, BP stock has rallied 40.6% compared with the industry’s 55.6% growth. Its peers, Shell plc (SHEL - Free Report) and Chevron Corporation (CVX - Free Report) , have risen 46% and 48.4%, respectively, during the same time frame. While price performance indicates a stock's attractiveness to some extent, it would be wiser to closely examine the company’s current business environment before offering any investment advice.
Image Source: Zacks Investment Research
Portfolio Restructuring to Improve BP’s Competitive Position
BP is simplifying its asset portfolio to focus on businesses that are more profitable, offer competitive returns and enhance shareholder value. Management had previously mentioned that it planned to conduct a company-wide review of its asset portfolio to identify and dispose of assets that do not fit its strategic objectives or dilute margins. This initiative is aimed at improving the quality of its earnings and cash flow over the long term. BP’s sale of the Gelsenkirchen refinery and the agreed sale of the Austrian mobility and convenience business are part of this broader objective. The company also agreed to exit its stake in Bay du Nord in Canada.
The company also plans to market the North Sea and Archaea businesses, simplifying its even further. BP does not view the divestment of non-core assets merely as a cost-cutting exercise but rather as a way to make the business more competitive, strengthen cash flow generation and enhance shareholder value.
Image Source: BP plc
BP’s Exploration Investments to Support Future Growth
BP’s exploration successes have emerged as one of the key growth catalysts for the company. The company continues to invest in building a multi-year upstream project pipeline that includes exploration and production opportunities across Brazil, the Gulf of America, Trinidad and Tobago and Venezuela. Notably, BP has signed an agreement with Venezuela to advance offshore gas development. The company has won an exploration and production license for the Loran Phase 2 offshore gas development, which is estimated to hold approximately 4 trillion cubic feet of recoverable gas resources.Further, the company has acquired a 70% interest in the Calypso gas project in Trinidad and Tobago from Woodside Energy, increasing its ownership in the project to 100%.
Additionally, BP has de-risked its exploration and production prospects in several existing projects across Brazil, Iraq and the U.S. Gulf by bringing in new partners. This enables BP to maintain meaningful economic exposure to the project while reducing exploration risk and sharing capital requirements. BP is prioritizing the addition of new upstream opportunities to its portfolio to counter natural production declines and strengthen the long-term outlook for its oil and gas business.
Structural Cost Reductions to Strengthen BP’s Profitability
BP is also focused on structural cost reductions to improve profitability and make the business more competitive. In its latest earnings call, management highlighted that the company has delivered $4 billion in structural cost reductions since 2023. The company continues to prioritize cost efficiencies and operational improvements to lower its structural cost base. In fact, management has expressed confidence in achieving an absolute cost base of around $18 billion by 2027. Structural cost reductions and stronger operational efficiencies can help the company achieve greater financial resilience and support sustainable returns, particularly during weaker commodity cycles.
Valuation Snapshot
The valuation snapshot indicates that BP is currently trading at a discount compared to the industry. This is reflected in its trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 2.40X compared with the broader industry average of 6.38X. However, it is currently trading cheaper compared to its peers, SHEL and CVX, which are trading at 4.18X and 7.28X trailing 12-month EV/EBITDA, respectively.
Image Source: Zacks Investment Research
Is It the Right Time to Bet on the Stock?
The current strength in oil and gas is extremely favorable for BP’s growing upstream operations. The integrated major should also benefit from stronger refining margins driven by the tightness in refined product markets and energy market volatility. BP is focused on improving its competitive position through portfolio simplification and structural cost reductions. In addition, new exploration opportunities and strategic partnerships should support its long-term production growth.
As such, investors may consider owning BP’s stock, which currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.