BP PLC

Overview Key strengths Key risks Strong position as one of the five global oil and gas supermajors. Exposure to the volatile, capital-intensive oil and gas industry. Significant diversity in terms of geographic spread, with lower cash flow exposure to emerging markets than many peers. Mounting challenges from the energy transition and uncertainty about the effects of BP's strategy to expand beyond oil and gas. Solid underlying cash flow generating capacity with increased flexibility for shareholder returns. Ambitious goals to both increase group cash generation and reduce upstream production from 2.2 million barrels of oil equivalent per day (mmboepd) in 2021 to 2 mmboepd by 2025 and 1.5 mmboepd by 2030. Still sizable downstream operations that can supplement and moderate upstream

...High prices and debt reduction mean strong metrics for BP. We currently project S&P Global Ratings-adjusted funds from operations (FFO) to debt well above our 35% target for the 'A-' rating in 2022 and 2023. BP's demonstrated debt reduction from operating cash flow and from disposals means credit metrics should remain consistent with the ratings at more moderate oil prices, including our long-term Brent assumption of $55 per barrel (/bbl). BP's financial framework provides visibility on uses of cash and balance sheet resilience. BP is distributing to shareholders at least 60% of surplus cash flow after its base dividend and capital expenditure (capex). These buybacks remain subject to the company maintaining a "strong investment grade" credit rating. Despite the significant shareholder returns, we expect BP will continue to generate positive discretionary cash flow (DCF; after capex and dividends), allowing net debt to decline further. Cash flows from oil and gas activities remain fundamental...

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