VALUATION HIGHLIGHTS
- Customers & Products constitute 83% of the Trefis price estimate for BP's stock.
- Gas & Low Carbon Energy constitutes 15% of the Trefis price estimate for BP's stock.
WHAT HAS CHANGED?
- Q4 2024 Snapshot
- The company reported an EPS of $0.44, which fell short of the $0.46 forecast. Revenue also missed estimates by $1.2 billion, recording $45.75 billion, down 12.3% year-over-year from $52.14 billion. Despite efforts to transition toward low-carbon energy, BP faced challenges maintaining growth amidst fluctuating oil markets and strategic investments in renewables, leading to a mixed quarterly performance.
- During the quarter, BP reported an underlying replacement cost profit of $1.17 billion, significantly below the $2.99 billion reported a year earlier, indicating a 61% decline. One-time items including impairments and inventory holding adjustments, affected the company's financial results. The company's drop in RC profit was also driven by weaker realized refining margins, higher impact from turnaround activity, seasonally lower customer volumes and fuels margins and higher other businesses & corporate underlying charges.
- Operationally, BP expanded its EV charging station network by 35%. The company's liquidity saw a 20.8% drop in operating cash flow year-over-year, down to $7.43 billion from $9.38 billion. Moreover, BP announced a steady dividend of 8 cents per share, in line with its ongoing focus on returning value to shareholders despite turbulent earnings results.
- Outlook
The energy company launched a $1.75 billion share buyback for the fourth quarter, with a dividend per ordinary share of $0.08. For the first quarter, BP has guided to buybacks of $1.75 billion. BP projects lower year-on-year upstream production in Q1, given previously announced divestments in Egypt and Trinidad, along with low realized refining margins and fuel margins sensitivity to cost of supply and earnings delivery, as well as the strength of the U.S. dollar — the currency that widely denominates commodities.
- Reshaping its Portfolio
BP has sought to turn its fortunes through a major restructuring that included at least $2 billion of cash savings by the end of 2026 (relative to 2023). In January 2025, the firm expanded its cost-cutting drive to cut 4,700 of roles, and it also revealed that it is seeking buyers for its Ruhr Oel GmbH German refinery assets. But concerns linger over the clarity of BP’s strategic direction amid its sprawling green energy ambitions.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of BP's value that present opportunities for upside or downside to the current Trefis price estimate for BP:
- Average Crude Oil & NGLs Sales Price: BP's average liquids sales price increased from $63 per barrel in 2021 to $69 per barrel in 2024. Given the volatile energy price environment, a 30% decrease in benchmark prices from ~$70 would lead to a nearly 5% contraction in BP's value.
For additional details, select a driver above or a division from the interactive Trefis split for BP at the top of the page.
BUSINESS SUMMARY
BP is a major player in the global energy industry, with operations spanning oil production, refining, and new renewable technologies. Its low-carbon energy segment focuses on natural gas, solar, and wind energy. The company is striving to pivot toward sustainable energy, keeping a diverse energy portfolio that includes both traditional hydrocarbon operations and significant investments in renewables. A key focus is its investment in natural gas as a transition fuel while aggressively expanding into solar and wind power ventures.
BP has concentrated on low-carbon energy initiatives, oil trading, and refining efficiency. The company aims to thrive in a market moving toward environmental sustainability, focusing on biofuels and decarbonization solutions.
SOURCES OF VALUE
Large base of proved reserves
Proved reserves are an extremely critical metric for an oil and gas exploration and production company. It represents the total quantity of technically and economically recoverable oil and gas reserves owned by the company at a given point in time. It directly impacts the company's production growth outlook. At the end of 2024, BP's total proved reserves stood at 6.25 billion oil-equivalent barrels (both developed and undeveloped). These reserves consist crude oil , natural gas, natural gas liquids).
BP Goes 'Capital-Light' on Low-Carbon Energy
BP also outlined a USD-20-billion target for divestments through 2027. At the same time, the British firm pledged to grow upstream operations by increasing oil and gas investments to about USD 10 billion per year. The company will seek to strengthen its portfolio and boost production to 2.3-2.5 million barrels of oil equivalent per day in 2030. The shift marks a departure from the low-carbon plan presented by BP in 2020 that aimed at 50 GW of renewables by 2030 while cutting down on oil and gas production. It also adds the company to a list of energy majors, including Shell and Equinor, that have decided to scale back their renewable ambitions.
KEY TRENDS
Peak oil
It is estimated that a large part of the world's oil reserves has already been discovered. Recent statistics have indicated that global consumption has been outpacing reserve additions. Peak oil is a commonly used term to describe the point at which world oil output will reach a maximum and decline afterward.
The International Energy Agency’s (IEA) The Oil and Gas Industry in Net Zero Transitions World Energy Outlook Special Report predicts that demand for oil and gas will peak before 2030. However, it also says that oil and gas will remain necessary in 2050 — although on a reduced production scale. Oil’s share of total energy demand fell below 30% for the first time ever in 2024, 50 years after peaking at 46%.
Improvements in technology
Due to limited underlying growth in product demand, there has been an increase in recent years toward increasing the complexity of refineries rather than expanding capacity. In the U.S., no new refineries have been built since 1980. However, improvements in process design and technology have seen capacity increase by around 1% per year.
The early refineries that were established were mainly used to process light sweet crude, resulting in an increase in demand for light sweet crude. As a result of higher oil prices in recent times, heavy crude oil is becoming more economically attractive. In addition, the interest in the development of new cost-effective methods for extracting and transporting heavy crude oil for refining into valuable light and middle distillate fuels is also increasing.
BP's Low Carbon Projects
BP is involved in two major low-carbon projects in Teesside, UK – the Northern Endurance Partnership carbon capture and storage project and the Net Zero Teesside Power project. These projects both reached financial close in December 2024. In October 2024, bp completed its acquisition of Lightsource bp, one of the world’s leading developers and operators of utility-scale solar and battery storage assets. This expanded the company’s onshore renewable energy presence to cover 19 global markets. In December 2024, bp and JERA Co. agreed to combine their offshore wind businesses to form an equally-owned joint venture called JERA Nex bp with completion expected by the end of Q3 2025.
