BP: Leadership Shift and Deleveraging Drive Compelling Recovery and Upside Potential

In a report released yesterday, Doug Leggate from Wolfe Research maintained a Buy rating on BP, with a price target of $51.00.

Doug Leggate has given his Buy rating due to a combination of factors that highlight BP as a compelling recovery story among the major oil companies. He views the appointment of Meg O’Neill as the new CEO as a clear signal that the board intends to accelerate execution on cost reductions, capital discipline, and balance sheet improvement, with early feedback from key shareholders indicating support for this leadership change. While a major strategic overhaul is not anticipated with the upcoming FY25 results, BP is expected to provide updates that could recalibrate the scale and timing of its cost savings and asset disposals, and there appears to be potential upside to production relative to the current expectation of flat output.

Leggate anchors his valuation thesis on the notion that equity value is essentially enterprise value minus net debt, and he highlights that BP’s combination of hybrids, net debt, and lease obligations—around $55 billion, or roughly 40% of its capital structure—creates substantial leverage to any meaningful deleveraging. Because these obligations currently consume about half of the company’s unlevered free cash flow, he argues that shifting priority from buybacks to balance sheet repair can unlock significant equity value. Coupled with a board and management team that now appear aligned around a full cost and portfolio review, Leggate sees BP as offering the greatest potential for positive change within its peer group, supporting his Outperform rating and $51 price target.

According to TipRanks, Leggate is a 5-star analyst with an average return of 9.9% and a 56.89% success rate. Leggate covers the Energy sector, focusing on stocks such as BP, Exxon Mobil, and Occidental Petroleum.