BP Stock Upgraded to Buy by UBS on CEO Change and Cost-Cutting Plans

TLDR

• UBS upgraded BP from “neutral” to “buy,” raising its 12-month price target 8% to 700p per share
• New CEO Meg O’Neill took over April 1, replacing Murray Auchincloss who stepped down in December 2025
• UBS sees $3–$6 billion in potential cost savings beyond BP’s own $1.5 billion target
• BP carries the highest leverage ratio in the sector at 47% net debt to capital
• BP stock is up 33% year-to-date, though it has underperformed peers by 52% since 2018

UBS upgraded BP to “buy” on April 15, citing new leadership, cost-cutting potential, and a path to lower debt. The bank lifted its 12-month price target 8% to 700p per share, up from 650p.

BP p.l.c., BP

The upgrade follows the arrival of Meg O’Neill as chief executive on April 1. She replaced Murray Auchincloss, who stepped down in December 2025. UBS expects O’Neill to lay out a full strategy update in the second half of 2026.

BP’s stock is up 33% year-to-date, partly driven by tighter global oil supply following US-Israeli strikes on Iran on February 27. Despite that, the stock has underperformed sector peers by 52% since 2018.

The company carries the heaviest debt load among the oil majors. Its net debt to capital ratio stands at 47%, well above the sector average of 28%. Total operating costs have risen by roughly $10 billion since 2019, reaching $43.1 billion in 2025.

UBS analyst Joshua Stone sees room to cut. He estimates BP could achieve $3 billion to $6 billion in cost savings beyond the company’s own target of $1.5 billion in non-portfolio savings by end-2027.

BP suspended its share buyback program in February 2026. The company has completed or announced $11 billion of a $20 billion asset disposal target, including the sale of 65% of its Castrol stake for an enterprise value of $10 billion, agreed in December 2025.

Debt Reduction Timeline

Under UBS’s base case — assuming $80 per barrel Brent from 2026 to 2028 — BP’s leverage ratio is projected to fall to 27% by 2028. In an upside scenario of $133 per barrel in 2026, that same level could be reached 18 months earlier.

UBS has set an upside price target of 900p and a downside of 430p. The bank values BP’s enterprise at $203.1 billion, or 979p per share, before netting $37.5 billion in debt and liabilities to arrive at a net asset value of 677p.

On the earnings front, UBS projects adjusted net income rising to $12.96 billion in 2026 from $7.49 billion in 2025. That puts EPS at $0.84, above the consensus estimate of $0.69.

Free cash flow is forecast at $13.44 billion in 2026. The dividend per share is projected at $0.34 for 2026, implying a yield of 4.5%.

Exploration Activity Picks Up

BP has announced 14 exploration discoveries since early 2025, spanning Trinidad, Egypt, the US Gulf, Libya, Namibia, Angola, and Brazil.

The standout is the Bumerangue discovery in Brazil, announced August 4, 2025. BP described it as its largest find in 25 years, with an estimated 8 billion barrels of liquids in place. UBS assigned it a risked net present value of $2 billion in its sum-of-the-parts analysis.

BP targets production of 2.3 to 2.5 million barrels of oil equivalent per day by 2030, up from current output of 2.3 million barrels per day.

According to GuruFocus, BP’s current price of $46.12 trades at a 29.3% premium to its GF Value of $35.68. The forward P/E stands at 10.92, below BP’s five-year median of 12.72.

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