BP PLC (LSE:BP.) shares may be under scrutiny but the oil giant can win back investor confidence if, said RBC Capital using cricketing terminology, it can get "runs on the board" with its asset sales.
RBC’s latest research note follows a meeting with BP’s CFO Kate Thomson and executive vice president for gas & low carbon, William Lin, where the company laid out its strategy for divestments and capital allocation.
With activist investor Elliott Management pushing for change, BP must now show tangible progress.
Elliott’s demands include selling off BP’s petrol station business, which could fetch as much as £31 billion.
But RBC’s focus is on BP delivering results across a broader divestment plan, which includes the potential sale of its lubricants unit Castrol.
Saudi Aramco has emerged as a frontrunner for Castrol, which could be worth up to £8 billion, but investors want to see deals completed, not just discussed.
BP’s management insists it remains committed to its financial framework and capital allocation priorities.
The company’s strategy, as laid out in its recent capital markets day, includes an increased focus on oil and gas, a more measured approach to renewables, and continued shareholder returns through dividends and buybacks.
However, RBC notes that BP must deliver on asset sales to reinforce this strategy and prove to the market that it can unlock value.
Despite the pressure, RBC maintains an ‘outperform’ rating on BP and a price target that suggests significant upside from current levels.
It sees BP as undervalued relative to peers and believes successful divestments could help narrow this gap. Investors, however, will be looking for execution, not just promises.
The Canadian bank's price target is 480p with an 'upside scenario' of 600p.
In afternoon trading, the stock was up 412.4p, down 1.5% on the day.