UBS has upgraded its recommendation on BP Plc to "buy" from "neutral" and increased its 12-month price target by 8% to 700p per share from 650p. The brokerage identified three primary drivers behind the move - a change in senior leadership, sizable scope to cut operating costs, and the potential for faster reduction of financial leverage - and presented an upside valuation case of 900p and a downside case of 430p.
The upgrade follows the appointment of Meg O'Neill as chief executive, effective April 1. She succeeded Murray Auchincloss, who stepped down in December 2025. UBS said it anticipates a comprehensive strategy update from O'Neill in the second half of 2026.
On relative performance, UBS noted BP's long-term underperformance versus peers, estimating the stock has lagged by 52% since 2018. That said, shares are up 33% year-to-date, a gain the brokerage attributes in part to tightened global oil supply after US-Israeli strikes on Iran on February 27.
UBS highlighted BP's balance-sheet and cost position as areas of concern and opportunity. The bank reports BP as carrying the highest leverage ratio in the major oil and gas sector at 47% net debt to capital, versus a sector average of 28%. BP also displays the highest operating cost intensity among the majors: total operating expenditure has risen by roughly $10 billion since 2019 and was $43.1 billion in 2025.
Against that backdrop, UBS estimates there is potential to deliver an additional $3 billion to $6 billion of cost savings beyond BP's own target of $1.5 billion in non-portfolio savings by the end of 2027.
UBS set out scenarios for the company's leverage trajectory tied to oil-price assumptions. Under its base case - which assumes Brent averages $80 per barrel for 2026-28 - the bank forecasts BP's net-debt-to-capital ratio falling to 27% by 2028. Under an upside price case that assumes Brent at $133 per barrel in 2026, UBS expects the same 27% leverage level to be reached 18 months earlier.
BP suspended its share buyback in February 2026. The company has completed or announced $11 billion of a planned $20 billion asset disposal programme, including a December 2025 agreement to sell 65% of its Castrol stake for an enterprise value of $10 billion.
On production, BP is targeting output of 2.3 to 2.5 million barrels of oil equivalent per day by 2030, up from current output of 2.3 million barrels of oil equivalent per day. Since early 2025, the company has announced 14 exploration discoveries across multiple jurisdictions, including Trinidad, Egypt, the US Gulf, Libya, Namibia, Angola and Brazil.
UBS attributed particular importance to the Bumerangue discovery in Brazil, which was announced on August 4, 2025 and described as BP's largest in 25 years. UBS reported Bumerangue holds approximately 8 billion barrels of liquids in place under fiscal terms that provide 80% cost oil. Within its sum-of-the-parts valuation, UBS applies a risked net present value of $2 billion to Bumerangue.
In constructing its valuation, UBS placed BP's enterprise value at $203.1 billion, equal to 979p per share, and then netted $37.5 billion in debt and other liabilities to derive a net asset value of 677p per share.
On the earnings and cash-flow front, UBS projects adjusted net income of $12.96 billion for 2026, up from $7.49 billion in 2025. The bank's earnings-per-share projection for 2026 is $0.84, versus a consensus estimate of $0.69. Dividend per share is forecast at $0.34 in 2026, implying a yield of 4.5% by UBS's estimates.
UBS's cash-flow outlook shows free cash flow of $13.44 billion in 2026, with free cash flow projected at $12.13 billion by 2030 as capital expenditure rises toward $15 billion from 2028 to fund new projects.
Summary: UBS upgraded BP to "buy" and lifted its 12-month target to 700p, pointing to a new chief executive, meaningful cost-reduction opportunities and the prospect of faster deleveraging as key factors. The bank provided upside and downside valuation cases and explicit forecasting assumptions for oil prices, cash flow, leverage and production as the basis for its view.
Key projections and valuation metrics highlighted by UBS:
- 12-month price target moved to 700p from 650p; upside case 900p, downside case 430p.
- Highest sector leverage at 47% net debt to capital (sector average 28%); UBS projects leverage to fall to 27% by 2028 under a $80/bbl Brent base case.
- Estimated additional operational cost savings of $3 billion to $6 billion beyond BP's $1.5 billion non-portfolio target by end-2027.
Operational notes: BP targets 2.3-2.5 mboe/d by 2030 from current 2.3 mboe/d and has reported 14 exploration discoveries since early 2025. UBS assigns a risked NPV of $2 billion to the Bumerangue discovery in Brazil.