A big upgrade for BP earnings and price target

 A sign at a BP petrol station in Chicago, Illinois. Photo: Scott Olson/Getty Images.

Further upside on this week’s 16-year high for BP (LSE:BP.) shares has been forecast after a City bank turned its focus to the oil giant’s next moves in the wake of a rapid reduction of debt.

Berenberg lifted its price target from 650p to 715p, having seen the share price jump by 35% since the start of the third quarter to trade at this afternoon’s level of 615p.

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The upgrade and 15% uplift to 2026 earnings estimates followed last week’s trading update, when BP highlighted material progress on balance sheet strengthening ahead of its third-quarter results on Friday 30 October.

Aided by higher commodity prices, BP said net debt at the end of the period was likely to be between $13.5 billion and $14.5 billion compared with $22.3 billion in the second quarter.

Berenberg expects a further reduction of $10 billion in the fourth quarter, including about $6 billion of proceeds from the agreed deal to sell a 65% stake in motor oil arm Castrol.

A stronger balance sheet increases available cash flow to shareholders, boosting hopes of a resumption of buybacks after they were put on hold at the start of this year.

Fewer shares in issue benefit the key metric of earnings per share and give investors a higher proportional stake in the company and future dividend distributions.

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While the 16-year high for shares presents an argument for holding off on buybacks, Berenberg still expects a “moderate” programme worth about $2 billion in 2027.

This should leave room for the continued reduction of hybrid and gross debt and ensure the company is in a better position in the next downcycle.

The focus of BP’s strategy update in New York on 15 December will also be on plans for investment and growth in the oil and gas upstream business.

Berenberg will be keen to find out whether new chief executive Meg O’Neill believes there are already sufficiently attractive projects and reserves or whether BP needs to switch from divestments to targeted acquisitions.

O’Neill took the helm on 1 April but has already reverted back to BP’s structure of two main business units - upstream and downstream - that was ditched six years ago as part of a pivot towards clean energy objectives.

The pipeline of growth opportunities has been boosted by a run of discoveries since the start of 2025, including the giant Bumerangue field in Brazil where initial estimates point to around eight billion barrels of liquids being in place.

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Berenberg said: “A key question is going to be whether management believes that it needs to acquire resources to strengthen certain focus areas for the business.

“Possible areas would include more shale resources in the US, LNG and conventional oil reserves. An indication of material acquisitions would likely be taken negatively by the market.”