VALUATION HIGHLIGHTS

1. Customers & Products constitute 80% of the Trefis price estimate for BP's stock.
2. Gas & Low Carbon Energy constitutes 18% of the Trefis price estimate for BP's stock.

WHAT HAS CHANGED?

1. Q4 2025 Snapshot

BP plc reported mixed Q4 2025 results, with underlying earnings slightly ahead of expectations but headline results weighed down by sizable impairments. The company posted adjusted EPS of about $0.60 on revenue of roughly $47.4 billion, modestly exceeding analyst forecasts, reflecting stable performance in its upstream and integrated energy businesses. However, BP reported a net loss of roughly $3.4 billion for the quarter, largely due to about $4 billion in write-downs, primarily linked to certain renewables and low-carbon projects.

Note: BP's FY'25 ended on December 31, 2025.

2. Capital Allocation Reset And Strategic Refocus

Q4 marked a significant reset for BP as management emphasized balance-sheet repair and a sharper focus on core hydrocarbon operations. The company suspended its share buyback program, redirecting excess cash toward reducing net debt, which it aims to lower to roughly $14–18 billion by 2027. Management framed the move as a more disciplined capital allocation strategy after a period of weaker profits and higher leverage.

At the same time, BP is rebalancing its investment priorities, scaling back parts of its low-carbon and renewables portfolio following around $4 billion in impairments tied to assets such as offshore wind and biogas projects. The company signaled that capital would increasingly be directed toward higher-return oil and gas projects, reflecting both investor pressure and a reassessment of returns from some transition investments.

The strategy shift also includes portfolio simplification and asset sales. BP has agreed to sell a 65% stake in its Castrol lubricants business to infrastructure investor Stonepeak in a deal valuing the unit at roughly $10 billion, with proceeds largely earmarked for debt reduction. This divestment is part of a broader plan to raise up to $20 billion through asset sales by 2027, helping strengthen the balance sheet while allowing the company to concentrate capital on upstream and integrated energy assets

3. Outlook

BP guided to a relatively cautious 2026 outlook, reflecting weaker commodity prices and a renewed focus on capital discipline. Management expects reported upstream production to be broadly flat to slightly lower year over year, with overall output projected at roughly 2.3 million barrels of oil equivalent per day, partly reflecting ongoing portfolio divestments. Capital expenditure is set to decline to around $13 billion to $13.5 billion, down from about $14.5 billion in 2025, as the company tightens investment spending and prioritizes higher-return projects. BP also expects divestment proceeds of roughly $9 billion to $10 billion in 2026, including about $6 billion from the sale of a majority stake in its Castrol lubricants business, with most proceeds weighted toward the second half of the year.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of BP's value that present opportunities for upside or downside to the current Trefis price estimate for BP:

• Average Crude Oil & NGLs Sales Price: BP's average liquids sales price increased from $63 per barrel in 2021 to $69 per barrel in 2024. However, the metric fell to around $61 in 2025, due to higher production from OPEC+ and shale producers, slower demand growth, and a resulting supply glut.
  The recent U.S.-Middle East conflict mainly creates volatility rather than permanently high oil prices. Oil prices will largely depend on how far the current geopolitical tensions escalate. If the conflict remains contained and does not disrupt major production or key shipping routes, crude prices should remain relatively stable as global supply continues to meet demand. In this scenario, improving inventories and steady production from major producers could keep prices in the $60 to $70 per barrel range. On the other hand, a broader escalation that threatens major oil-producing regions or critical transit chokepoints could trigger a sharp risk premium in the market, potentially pushing prices toward $90 per barrel or higher. For now, our base case assumes disruptions remain limited and supply from major producers offsets potential shocks. Under this outlook, we expect oil to average around $70 per barrel in 2026, reflecting a broadly balanced market with moderate demand growth and manageable geopolitical risks.

For additional details, select a driver above or a division from the interactive Trefis split for BP at the top of the page.

BUSINESS SUMMARY

BP is a major player in the global energy industry, with operations spanning oil and gas production, refining, trading, and selected renewable energy businesses. The company maintains a diversified portfolio that includes traditional hydrocarbon operations alongside investments in transition energy technologies such as biofuels, EV charging, hydrogen, and renewable power.

BP is increasingly prioritizing its core oil and gas operations, along with refining efficiency and trading, while making targeted investments in transition areas such as biofuels, EV charging, and decarbonization technologies.

SOURCES OF VALUE

Large base of proved reserves

Proved reserves are an extremely critical metric for an oil and gas exploration and production company. It represents the total quantity of technically and economically recoverable oil and gas reserves owned by the company at a given point in time. It directly impacts the company's production growth outlook. At the end of 2025, BP's total proved reserves stood at 6.2 billion oil-equivalent barrels (both developed and undeveloped). These reserves consist crude oil, natural gas, natural gas liquids).

BP Goes 'Capital-Light' on Low-Carbon Energy

BP has outlined a strategic reset that includes a target of raising around USD 20 billion through divestments by 2027, aimed at strengthening its balance sheet and focusing on higher‑return areas. At the same time, the company plans to increase annual oil and gas investments to roughly USD 10 billion, supporting a goal of boosting upstream production to about 2.3–2.5 million barrels of oil equivalent per day by 2030.This approach marks a clear departure from BP’s 2020 strategy, which aimed to reduce oil and gas output while building 50 GW of renewable energy capacity by 2030.

KEY TRENDS

Peak oil

It is estimated that a large portion of the world’s oil reserves has already been discovered. Recent statistics suggest that global consumption growth has often outpaced the pace of new reserve additions. Peak oil is a commonly used term describing the point at which global oil production reaches its maximum level before gradually declining.

The International Energy Agency’s (IEA) World Energy Outlook suggests that global demand for oil and gas could peak before 2030 under current policy trends. According to the IEA’s latest medium-term outlook, global oil demand is expected to continue rising modestly through the rest of the decade, reaching a plateau of around 105.5 million barrels per day by 2030, before growth slows significantly. Despite these shifts, oil and gas are still expected to play an important role in the global energy system through 2050, though at a reduced share compared with today.

Improvements in technology

Due to limited growth in global fuel demand, the refining industry has increasingly focused on improving refinery complexity and efficiency rather than building large numbers of new facilities. Advances in refining technology and process optimization have allowed operators to increase throughput and improve margins from existing assets. These improvements also enable refineries to process a wider range of crude grades, including heavier and more sulfur-rich crude oils that are typically cheaper than light sweet crude. For companies like BP, continued investment in refining technology and efficiency helps enhance profitability while adapting facilities to produce cleaner fuels and biofuel blends.