Analysts suggest BP shares undervalued by 30% on international growth

BP shares may be undervalued by as much as 30 per cent, according to analysts who point to the company’s recent progress in developing international oil and gas assets. Citi’s global head of energy research, Alastair Syme, and his team argued that the firm’s position in the super-giant Kirkuk field in Iraq, combined with its recent acquisition of the Loran gas field in Venezuela and a 100 per cent stake in the Bumerangue discovery offshore Brazil, could translate into a significant uplift in the current valuation multiple.

RBC Capital Markets echoed this sentiment, noting that BP’s upstream reserves appear more robust than they have been in some time. This positive reassessment comes amid heightened attention to the strategic importance of hydrocarbon reserves, driven by supply concerns linked to the ongoing conflict in the Middle East. The shift also marks a departure from the company’s previous strategic direction, which under former chief executive Bernard Looney prioritised a 40 per cent reduction in hydrocarbon production in favour of expanding into wind, solar, hydrogen and other clean energy sectors.

Since Looney’s departure in 2023, BP has undergone significant leadership changes, appointing two new chief executives and two chairmen. Meg O’Neill assumed the role of chief executive in April, succeeding Murray Auchincloss, while Ian Tylor replaced Albert Manifold as chairman. Under O’Neill’s leadership, the company has moved to consolidate its international operations. In Iraq, BP brought in ConocoPhillips as a co-investor, while in Venezuela, it joined forces with Adnoc and Qatar’s UCC on the Loren licence, which is estimated to hold four trillion cubic feet of recoverable gas resources. This gas can be exported via BP’s existing offshore infrastructure in Trinidad.

In Brazil, the company secured Shell as a 50 per cent investor in its Tupinambá exploration block in the Santos Basin, located near the Bumerangue discovery, which was BP’s largest find in 25 years. Additionally, O’Neill has initiated a sale process for BP’s historic North Sea business, aiming to concentrate capital in areas that best align with the company’s current strategy. Further details regarding the North Sea divestment have not yet been disclosed.