BP plc is a much better equity story than just how much cash it is handing out to shareholders, according to analysts at UBS.
All of the talk recently has been about share buybacks and its low relative rating, but a low oil price breakeven and efficient production base will provide the funds to sustain total distributions, while also funding growth from low carbon, said the Swiss bank.
UBS noted that while the electric vehicle transformation might have stalled recently, peak oil demand is still on the horizon and as EV use grows, this will displace three million barrels of daily oil demand by 2030 and nine million by 2040.
BP is better prepared for this energy transition than peers, UBS suggested, even with higher debt and as its businesses here gain scale, breakeven will fall to US$40 per barrel.
EV charging is also a natural area for BP to succeed given the fuel marketing business it already has, plus its real estate in key strategic locations and an improved convenience offering.
BP is making partnerships with OEMs (including Tesla), with lessons learnt having been an early adopter.
By 2030, UBS sees this business as being worth 138p per share or more than the lost value in fuels.
Buy with a 600p share price target is the Swiss bank’s view on BP shares.