BP Plc (BP) is an oil and gas supermajor that operates across exploration and production, refining, distribution, marketing, electricity generation, and trading. BP is also one of the world’s largest companies by revenue and profits in any industry, explains Kelley Wright, editor of Investment Quality Trends.
Listed on the London Stock Exchange, BP is a FTSE 100 index constituent. It also trades in the US. It is a company in transition as it has a “decarbonization” strategy with a focus on renewables, bioenergy, carbon capture and storage technologies, hydrogen, electric vehicle charging, and a target of net zero emissions by 2050.
This does not mean the company has abandoned hydrocarbons, however. BP projects EBITDA of $46-49 billion in FY2025, unchanged vs. previously announced targets; and a hydrocarbons EBITDA of $41-44 billion and group EBITDA of $53-58 billion by FY2030. That was $2 billion higher versus previous targets, driven mostly by hydrocarbons.
BP expects capex of $14-18 billion per year between 2024 and 2030, capacity for a 4% annual dividend increase with oil at $60/barrel, and capacity for $4 billion of share buybacks per year at $60/barrel.
In short, BP is integrating green energy into its hydrocarbon business. Based on its historically repetitive dividend yield boundaries, BP is solidly in our Undervalued area. The Return on Invested Capital is 14%, and the Free Cash Flow Yield is 12%.
The stock was trading in the $34-$35 range in late 2023, significantly below its Economic Book Value of $179 per share. Including its 4.7% dividend yield, BP is a strong growth and income option for any portfolio.
