UBS has upgraded its rating on BP from “neutral” to “buy,” reflecting a growing belief in the company’s potential for recovery and strategic growth. The brokerage has set a new 12-month price target of 700p per share, representing an 8% increase from the previous target of 650p. This decision is largely attributed to the leadership change at BP, the potential for significant cost reductions, and an ongoing effort to reduce debt levels.
The recent leadership transition saw Meg O’Neill take the helm as chief executive on April 1, succeeding Murray Auchincloss, who stepped down in December 2025. UBS analysts anticipate that O’Neill will reveal a comprehensive strategy update in the latter part of 2026, which could further clarify BP’s direction and operational focus.
Despite underperforming its peers by 52% since 2018, BP’s stock has seen a notable 33% increase year-to-date, driven in part by geopolitical events, specifically the U.S.-Israeli strikes on Iran on February 27, which have exacerbated global oil supply constraints. UBS has highlighted that BP currently holds the highest leverage ratio within its sector, standing at 47% net debt to capital, significantly above the sector average of 28%. Moreover, operating costs have surged by approximately $10 billion since 2019, resulting in a total operational expenditure (opex) of $43.1 billion projected for 2025.
The brokerage identifies an opportunity for substantial cost efficiencies, estimating possible savings ranging from $3 billion to $6 billion beyond BP’s own target of $1.5 billion in non-portfolio savings by the end of 2027. UBS expects BP’s leverage ratio to decline to 27% by 2028 under a base case scenario of $80 per barrel for Brent crude oil during the 2026-28 period. In an optimistic scenario with oil prices hitting $133 per barrel in 2026, this reduction could occur even earlier, within 18 months.
In a move reflecting its ongoing strategy to enhance financial health, BP suspended its share buyback program in February 2026. The company has also initiated an asset disposal effort, having completed or announced $11 billion of its $20 billion target, which includes a significant agreement from December 2025 to sell 65% of its Castrol stake for an enterprise value of $10 billion.
On the production front, BP aims to maintain output levels between 2.3 to 2.5 million barrels of oil equivalent per day by 2030, maintaining its current output. Notably, since early 2025, BP has announced 14 exploration discoveries across various regions including Trinidad, Egypt, and Brazil. Among these, the Bumerangue discovery in Brazil, revealed in August 2025, is touted as BP’s largest find in 25 years, estimated to contain approximately 8 billion barrels of liquids in place.
UBS has factored this discovery into its financial models, assigning a risked net present value (NPV) of $2 billion for Bumerangue, leading to an overall enterprise valuation for BP of $203.1 billion, or 979p per share, before deducting $37.5 billion in debt and other liabilities to arrive at a net asset value (NAV) of 677p.
Looking ahead, UBS projects adjusted net income for BP to rise to $12.96 billion in 2026, up from $7.49 billion in 2025, resulting in earnings per share (EPS) of $0.84 compared to a consensus estimate of $0.69. Additionally, dividends per share are forecasted at $0.34 for 2026, which would yield approximately 4.5%. Free cash flow is expected to reach $13.44 billion in 2026, before declining slightly to $12.13 billion by 2030, as capital expenditures are anticipated to ramp up towards $15 billion to support new projects.
