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 profitability of BP's investments into new energy. Still sizable downstream and retail operations that can supplement and moderate upstream cycles. Higher debt level than other supermajors and consistently high shareholder remuneration. Buybacks of $7 billion per year are a meaningful drag to cash flow generation on top of the annual dividend of $5-6 billion and capex of around $16 billion, ultimately leading to slightly negative discretionary

...BP's has some flexibility at current 'A-' rating but this headroom could reduce over time on high shareholder remuneration at the expense of balance sheet strength. Buybacks of $7 billion per year are a meaningful drag to cash flow generation on top of the annual dividend of $5-6 billion and capex of around $16 billion, ultimately leading to slightly negative discretionary cash flow (DCF) in 2024. At the same time cash flow generation in the core upstream segment should remain solid at the assumed Brent oil price of $75 and should support maintenance of funds from operations (FFO) to debt at around 40% in 2025. We expect the management to adjust share buybacks down if DCF turns meaningfully negative so that it does not result in...

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