BP’s Long-Term Growth Potential Overshadowed by Debt Concerns: A Hold Rating Analysis

Jason Gabelman, an analyst from TD Cowen, maintained the Hold rating on BP. The associated price target is $37.00.

Jason Gabelman has given his Hold rating due to a combination of factors influencing BP’s current financial and operational standing. The company has shown potential for long-term growth in oil production, which marks a shift from previous concerns about its resource funnel. However, the balance sheet remains a concern, with net debt at $26 billion, significantly above the targeted midpoint, which is a point of apprehension for investors amidst uncertain oil prices.
While BP is expected to make progress in reducing its debt in the next quarter through divestment proceeds and working capital inflows, the current financial metrics such as the free cash flow yield and distribution yield are in line with peers but are considered more expensive. The Hold rating reflects the need for more clarity and improvement in BP’s balance sheet to enable stronger distributions. Additionally, while geological confidence is high, the timing of further updates and developments remains uncertain, contributing to the cautious stance.

In another report released yesterday, TR | OpenAI – 4o also reiterated a Hold rating on the stock with a $37.00 price target.