BP PLC (LSE:BP.) has been handed a “second chance” to repair its balance sheet as elevated commodity prices open a fresh window for debt reduction, that's according to RBC Capital Markets, which has now upgraded the oil supermajor to outperform.
Analysts, in a note, meanwhile, repeated a 700p price target that implies roughly 31% upside, and said the combination of stronger oil and gas prices, recent exploration success and a new management team could help restore investor confidence after years of weaker capital allocation and lagging share-price performance.
RBC said BP’s leverage remains higher than peers, but expects all-in net debt-to-CFFO to fall from about 2.0 times in 2025 to 1.0 times by 2027 under an $80-per-barrel Brent scenario, with the company’s balance sheet potentially moving much closer to sector norms within the next 12 to 18 months.
“The current environment presents an opportunity to manage the balance sheet more prudently than in the past, and we expect the repair to occur through 2026,” the Canadian bank's analysts said.
Meg O’Neill, BP's new CEO, should avoid rushing back into shareholder distributions even if BP reaches its debt target earlier than expected, than bank added, warning that restarting buybacks too soon could deliver a short-term “sugar rush” while creating medium-term risk.
“New management must not get FOMO,” RBC said, adding that BP would be better served by keeping its focus on debt reduction for at least the next 12 to 18 months.
Beyond deleveraging, RBC pointed to BP’s upstream project pipeline and exploration activity, particularly the Bumerangue discovery in Brazil, as potential sources of future positive news flow. The broker also suggested farm-downs in the Gulf of Mexico could release capital and support near-term free cash flow.
On valuation, RBC said BP now screens cheaply not only against market capitalisation but also on enterprise value measures, trading at 3.7 times 2027 estimated EV/DACF against 4.7 times for European peers. Its forecasts for 2026 and 2027 earnings per share are also 13% and 21% above consensus, respectively.