RBC raises BP estimates, cites debt reduction path, sets 700p target

What happened

RBC Capital raised its earnings estimates for BP and reiterated an Outperform rating with a 700p price target, citing expected debt reduction from the company's $20bn divestment program. This aligns with BP's stated goal of lowering net debt from $23bn at end-2024 to $14-18bn by 2027, supported by the ~$6bn Castrol sale. The broker's optimism likely reflects improving confidence in BP's execution of its hydrocarbon-focused reset and cost reductions. However, the target implies a valuation above even the bull case in our framework, suggesting RBC may be pricing in a more favorable commodity environment or flawless execution. The news is a positive sentiment signal but does not alter the fundamental thesis, which remains a potential buy with disciplined position sizing.

Implication

RBC's raised estimates and debt reduction focus reinforce the deleveraging narrative that underpins BP's investment case. The 700p target implies substantial upside, but it sits above our bull scenario value, suggesting the broker may be using more bullish oil price assumptions or perfect execution. Investors should monitor upcoming divestment announcements and net debt trajectory rather than rely on broker targets. The master report's base case still offers a reasonable risk/reward, and the news does not change our conviction level. Maintain a measured approach, accumulating on weakness near the attractive entry of $34 and trimming above $44.

Thesis delta

The thesis remains unchanged: BP is a potential buy based on deleveraging and upstream growth. RBC's bullish note reinforces the deleveraging pillar but does not alter our probability-weighted valuation. No change to conviction or price targets.