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Whereas many traders are placing the newest BP (LSE: BP.) share surge all the way down to larger oil costs, I’m not satisfied that tells the entire story.
Final yr’s technique reset was initially considered as one other muddled pivot after years of chasing renewables. However maybe the market is beginning to see it otherwise. This isn’t merely one other change of path. It’s about simplifying BP, specializing in what it does greatest and enhancing the returns from these property.
If that’s what the market is starting to recognise, the query is not simply why BP shares have risen 30%. It’s the place they might go from right here.
A less complicated BP
The primary a part of the story is simplification. Meg O’Neill has been fairly clear that the corporate’s not all in favour of holding companies just because they’ve been a part of the group for years. If an asset doesn’t match the technique or generate the returns it wants, it is going to be bought.
Latest hypothesis over the potential sale of its Brazilian biofuels enterprise is an effective instance. That may seem like a comparatively small disposal, however I believe the larger level is what it says in regards to the new administration mindset.
For me, the technique reset isn’t merely about shifting again in direction of oil and gasoline. It’s about making BP a extra targeted enterprise, with capital directed in direction of the property the place it may generate the most effective returns.
Turning simplification into money
The second a part of the story is money. And that is the place I believe the technique reset begins to look extra attention-grabbing.
BP generated $14.4bn of adjusted free money stream within the first half of 2026, in contrast with $6.9bn a yr earlier.
Crucially, these figures are on a price-adjusted foundation, utilizing the identical commodity worth assumptions. That issues as a result of it reduces the affect of oil and gasoline worth volatility and offers a greater indication of whether or not the underlying enterprise is enhancing.
The $14.4bn determine additionally must be considered alongside $6.4bn of capital expenditure in the course of the interval. So regardless of persevering with to spend money on the enterprise, BP is producing a considerable amount of money.
For me, that’s the quantity that issues. If BP can simplify the portfolio whereas producing extra cash from the property it retains, the reset begins to look much less like one other strategic U-turn and extra like a real enchancment within the enterprise.
The dangers
After all, there are nonetheless loads of methods this story might go unsuitable. BP stays closely uncovered to grease and gasoline costs, and a sustained fall would put strain on money technology.
Execution stays one other key danger. Promoting property and simplifying the enterprise is one factor, however getting the remaining portfolio to ship constantly larger returns is one other.
And regardless of the development in money technology, the corporate’s steadiness sheet hasn’t but moved in the identical path. Internet debt was $22.3bn on the half-year, broadly unchanged from the top of 2025.
For me, that’s one thing to look at. The reset must ship sustained money technology, not only one robust interval.
Nonetheless, if the market continues to view BP in a brand new gentle, and the simplification programme delivers robust money flows and falling debt, the shares might look low cost at this time. That’s why I view them as one to contemplate.
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Andrew Mackie owns shares in BP.
