BP plc (BP) , the UK-based energy major, is facing mounting pressure from activist investor Elliott Management, which has been meeting major shareholders to advocate deeper reforms, including cost cuts and potential leadership changes. The push came despite BP’s recent shift to hydrocarbons, following a strategy revamp last month.BP Faces Investor Scrutiny Over PerformanceBP has lagged rivals Shell and ExxonMobil over the past five years, a trend that many investors attribute to the company’s 2020 decision ...

Company Performance - BP closed at $34.11, reflecting a -1.27% change from the previous day, underperforming the S&P 500's gain of 1.77% [1] - Over the past month, BP shares increased by 1.95%, while the Oils-Energy sector gained 0.43% and the S&P 500 decreased by 5.73% [1] Earnings Projections - The upcoming EPS for BP is projected at $0.64, indicating a 34.02% decline compared to the same quarter last year [2] - Revenue is expected to reach $57.08 billion, representing a 14.25% increase from the year-ago quarter [2] - For the full year, earnings are projected at $3.21 per share and revenue at $241.39 billion, reflecting changes of -1.53% and +24.02% respectively from the prior year [3] Analyst Estimates and Valuation - Recent adjustments to analyst estimates for BP are crucial as they reflect short-term business trends, with positive revisions indicating a favorable outlook on the company's health and profitability [4] - The Zacks Rank system, which incorporates estimate changes, currently ranks BP at 3 (Hold), with a recent EPS estimate decrease of 9.11% [6] - BP's Forward P/E ratio stands at 10.78, which is a premium compared to the industry average of 7.99 [6] - The PEG ratio for BP is 1.22, slightly above the industry average of 1.19 [7] Industry Context - The Oil and Gas - Integrated - International industry, to which BP belongs, ranks in the bottom 39% of all industries according to the Zacks Industry Rank [8]

Group 1: BP's Transaction and Strategic Moves - BP has secured a $1 billion deal with Apollo-managed funds to divest a 25% non-controlling stake in BP Pipelines, which holds BP's 12% interest in the Trans-Anatolian Natural Gas Pipeline (TANAP) [1] - The agreement builds on a previous transaction in November 2024, where Apollo acquired a stake in the Trans Adriatic Pipeline, enhancing BP's ability to monetize infrastructure assets while retaining strategic governance rights [2] - The sale is expected to close in the second quarter of 2025, pending regulatory and shareholder approvals, and is part of BP's broader divestment program targeting $20 billion in proceeds [3] Group 2: Importance of TANAP and European Energy Security - TANAP spans approximately 1,800 kilometers across Türkiye and is a crucial segment of the Southern Gas Corridor, delivering gas from Azerbaijan's Shah Deniz field to European markets [4] - The pipeline plays a vital role in European energy security by ensuring a steady supply of natural gas [4] Group 3: Operational Updates and Future Prospects - BP recently resolved a temporary shutdown at its Shah Deniz Alfa platform due to a subsea pipeline technical issue, with operations resuming swiftly [5] - The Shah Deniz project has been a cornerstone of Azerbaijan's gas exports since 2007, with the second phase expanding production capabilities [5] - BP continues to optimize its portfolio while maintaining a stake in energy infrastructure critical for European gas supply [6]

Core Insights - BP plc is seeking to sell a 50% stake in its solar unit, Lightsource BP, to cut costs and improve returns while addressing investor concerns [1][7] - The initiative, named Project Scala, aims to find a strategic partner with expertise in renewable energy [2][3] - BP's recent strategy shift under CEO Murray Auchincloss emphasizes increasing returns from its renewable business while balancing financial discipline [3][5] Company Strategy - BP took full control of Lightsource BP for £400 million plus £2.1 billion in debt last October and is now looking to partially divest [2] - The company plans to cut renewable energy investments while increasing annual oil and gas spending to $10 billion [5] - BP is targeting $20 billion in divestments by 2027 and is reviewing its lubricants business, Castrol [5] Market Position and Expansion - Lightsource BP currently operates 5.7 gigawatts of assets across 19 markets, with over 2 GW of new projects completed in 2024 [3] - BP's sales document outlines an ambitious expansion strategy for Lightsource BP, targeting 3 to 5 GW of annual capacity additions [6] - A new investor could provide access to specific markets, such as India, where solar demand is surging [6] Investor Pressure - BP is under pressure from investors, particularly activist fund Elliott Management, which has built a 5% stake in the company [4] - Elliott Management has urged BP to scale back its green energy investments and focus on more profitable ventures, including oil and gas [4]

Core Viewpoint - BP plc is showing strong technical signals with a potential Golden Cross on the horizon, indicating possible upside for the stock price [1][4]. Technical Analysis - BP's stock is currently priced at $33.39, above its five-day, 20-day, 50-day, and 200-day simple moving averages [1]. - The 50-day moving average is at $32.21 and is approaching the 200-day average of $32.47, suggesting a bullish trend [1]. - The Moving Average Convergence Divergence (MACD) is at a negative 0.02, indicating a bearish signal, while the Relative Strength Index (RSI) is at 58.21, nearing overbought territory but still allowing for potential gains [2]. Strategic Developments - BP has entered a 50-50 joint venture with Jera Co. Inc. to accelerate offshore wind projects across Europe, Asia-Pacific, and the U.S., which could serve as a catalyst for stock momentum [2][3]. - The partnership aims for a projected net generating capacity of 13 gigawatts, positioning BP as a significant player in the global energy transition [3]. - BP is also considering selling its Castrol lubricants business, which could generate approximately $10 billion, potentially strengthening its balance sheet [3]. Investor Insights - A successful Golden Cross could mark BP's transition into a sustained bullish phase, presenting an entry point for investors [4]. - Traders are advised to monitor the RSI for potential near-term pullbacks before a stronger upward movement [4]. - If BP effectively implements its wind energy strategy and improves its financials, the stock may experience extended gains beyond the current bullish technical setup [4].

Group 1: Impact of COVID-19 on Oil Demand - The COVID-19 pandemic caused a significant collapse in oil demand due to global lockdowns, leading to oil prices briefly turning negative in April 2020 [1] - As economies reopened, oil demand rebounded sharply, with the energy landscape still adjusting nearly five years post-pandemic [1][3] - The return of mobility and travel has led to a surge in global air travel, resulting in increased jet fuel demand and record aircraft orders by airlines [3] Group 2: Shifts in Energy Investment Strategies - Major energy companies like BP, ExxonMobil, and Chevron are reassessing their strategies due to resilient oil and gas demand [2][4] - BP's decision to scale back renewable energy investments and increase oil and gas spending by 20% to $10 billion reflects a shift in expectations regarding future energy demand [6] - ExxonMobil and Chevron have maintained a steady focus on expanding fossil fuel assets while cautiously approaching renewable energy [7][9] Group 3: Future of Energy and Technological Developments - The transition to renewables is ongoing but slower and more complex than anticipated, with oil expected to remain a dominant energy source for decades [11] - Carbon capture technologies are gaining traction, allowing oil companies to reduce emissions while continuing fossil fuel production [12] - Hydrogen and biofuels are emerging as long-term investment areas, with companies exploring their potential to balance profitability and sustainability [13][14]

Financial Performance - Adjusted EBITDA for 2024 reached $38 billion, with operating cash flow of $27.3 billion[49] - Operating cash flow for 2024 was $27.3 billion, down from $32.0 billion in 2023, primarily due to lower profits from operations[158] - Profit attributable to bp shareholders for 2024 is projected to be $0.4 billion, with total equity at $78.3 billion[167] - Total shareholder return for 2024 decreased by 11.9%, reflecting a reduction in share price[156] - Underlying replacement cost profit for 2024 was $0.4 billion, a significant decrease from $15.2 billion in 2023[150] Production and Operations - Upstream production increased by 2% compared to 2023, with strong plant reliability at over 95%[48] - Upstream production increased to 2.4 million barrels of oil equivalent per day (mmboe/d) in 2024, up from 2.3 mmboe/d in 2023[100] - Biofuels production rose to 35,000 barrels per day (kb/d) in 2024, compared to 32 kb/d in 2023[100] - Refining availability dipped to 94.3% due to lower margins and a power outage at Whiting in Q1[48] - Refining availability for 2024 was 94.3%, a decrease from 96.1% in 2023, mainly due to a power outage at the Whiting refinery[140] - Upstream unit production costs increased to $6.17 per barrel of oil equivalent (boe) in 2024, up from $5.78 in 2023[164][165] - Methane intensity increased to 0.07% in 2024, with methane emissions from upstream operations rising by approximately 48% from 31kt in 2023 to 46kt in 2024[173][174] Capital Expenditure and Investments - Capital expenditure for 2024 was $16.2 billion, with expectations of around $15 billion in 2025 and $13-15 billion per annum for 2026 and 2027[191] - The company plans to invest between $1.5-2.0 billion annually in transition businesses through 2027, which is over $5 billion lower per year than previous guidance[94] - The company plans to invest in hydrogen and carbon capture, sanctioning four projects in 2024[50] - The company is actively investing in hydrogen and carbon capture projects to support decarbonization efforts[94] Shareholder Returns and Dividends - The company raised the dividend per ordinary share by 10% and announced $7 billion in share buybacks for the year[49] - The dividend per ordinary share has grown by 10% to 8.00 cents since Q4 2023, with expected annual increases of at least 4%[188] - The company announced share buybacks of $7 billion for 2024, reducing shares in issue by 22% from the end of Q1 2021 to December 31, 2024[193] - The company distributed a total of $5.0 billion in dividends to shareholders in 2023[134] Strategic Initiatives and Portfolio Reshaping - The company is focused on reshaping its portfolio, having made significant changes in the past year[50] - The company is reshaping its portfolio to focus on markets where it has integrated positions, aiming to improve performance and reduce costs[93] - The company now owns 100% of bp bioenergy, a top-three sugarcane bioethanol producer in Brazil, and Lightsource bp, a leading solar developer[50] - The company has developed 8.2 gigawatts (GW) of renewables to final investment decision (net) in 2024, up from 6.2 GW in 2023[100] Safety and Sustainability - The company is committed to improving safety, reducing tier 1 and 2 process safety events for the second consecutive year[47] - Reported recordable injury frequency increased by 8.5% in 2024, indicating a need for improved safety measures[146] - The estimated carbon intensity of the company's energy products is being monitored as part of its sustainability targets[127] - Emission reduction targets include a decrease in operational emissions across Scope 1 and 2 by 2030, based on a 2019 baseline[198] - Carbon prices are projected to rise from $50 per tonne of CO2 equivalent in 2025 to $200 by 2050[207] Future Projections and Goals - Adjusted free cash flow is expected to grow at a compound annual growth rate (CAGR) of over 20% from 2024 to 2027[97] - The company aims for net debt to be between $14-18 billion by the end of 2027[97] - The company aims for a return on average capital employed (ROACE) to exceed 16% by 2027[97] - The company targets net debt of $14-18 billion by the end of 2027, with net debt increasing from $20.9 billion to $23.0 billion in 2024[189] - The underlying effective tax rate is projected to be around 40% in 2025, down from 41%[199] - Investment appraisal price assumptions for Brent oil and Henry Hub gas are set at approximately $64 per barrel and $4.0 per million British thermal units, respectively, from 2025 to 2050[206]

Core Viewpoint - BP plc is shifting its investment strategy from renewable energy to oil and gas to enhance investor confidence and returns amid declining share prices [1][2]. Investment Strategy Changes - BP plans to increase annual spending on oil and gas by nearly 20% to almost $10 billion, while reducing renewable energy investments by over $5 billion, now projected between $1.5 billion and $2 billion annually [3]. - The company has revised its oil and gas production targets, aiming for 2.3-2.5 million barrels of oil equivalent per day (boepd) by 2030 [3]. Management Perspective - Current CEO Murray Auchincloss acknowledges that BP had previously overestimated the viability of transitioning to renewables and is now focusing on profitable business segments [5]. - Auchincloss aims to simplify BP's operations and maintain selective investments in renewables while prioritizing shareholder returns [4][5]. Emission Targets and Financial Adjustments - BP has scrapped its Scope 3 emissions reduction target, which aimed for a 20-30% reduction from 2019 to 2030, and instead plans to reduce the carbon intensity of its energy products by nearly 10% in the same timeframe [7]. - The company has adjusted its overall capital expenditures to between $13 billion and $15 billion annually through 2027, down from $16 billion in 2024, while planning a 4% annual increase in dividends per share [9]. Criticism and Market Reaction - The strategic pivot back to fossil fuels has faced backlash from climate activists, who argue that this undermines efforts to address climate change [10][11]. - Despite the criticism, BP maintains its commitment to achieving net-zero carbon emissions by 2050, recognizing the ongoing demand for hydrocarbons in the near future [6].

Group 1: Market Sentiment and Trading Activity - Investors gauge market sentiment through stock purchases and options trading, with options providing deeper insights into bullish views [1][2] - Unusual call options trading activity can indicate stronger sentiment than regular stock buying, particularly for Occidental Petroleum, PDD Holdings, and BP [3][6] Group 2: Occidental Petroleum Analysis - Occidental Petroleum's 12-month stock price forecast is $61.55, indicating a 26.55% upside based on 21 analyst ratings, with a high forecast of $78.00 and a low of $45.00 [4] - Warren Buffett's acquisition of 29% of Occidental Petroleum has led to increased bullish sentiment in the energy sector [4][5] - Analysts at Stephens maintain an overweight rating on Occidental Petroleum, projecting a valuation of $71 per share, suggesting a potential 46% rally [7] Group 3: PDD Holdings Analysis - PDD Holdings has a 12-month stock price forecast of $173.40, representing a 46.11% upside based on 13 analyst ratings, with a high forecast of $272.00 and a low of $105.00 [9] - The stock trades at 73% of its 52-week high, with potential upside driven by China's economic stimulus [10][11] Group 4: BP Analysis - BP's 12-month stock price forecast is $38.76, indicating a 17.02% upside based on 21 analyst ratings, with a high forecast of $50.00 and a low of $31.80 [12] - Significant call options activity for BP, totaling $633,929, suggests bullish developments, supported by expected earnings per share (EPS) growth from $0.44 to $0.99 by Q3 2025 [12][13] - Analysts from Wolfe Research initiated coverage on BP with a valuation of $50 per share, indicating a potential 53% rally [14]

Group 1 - BP announced a major strategy change five years ago, aiming to transition from an "international oil company" to an "integrated energy company" by 2025 [1] - The company plans to invest only 60% of its capital in oil and gas, indicating a shift towards renewable energy sources [1] Group 2 - The article reflects the author's personal investment strategy, focusing on long-term positions and maximizing total return by purchasing undervalued assets [1]