BP's big opportunity is in its upstream oil and gas business - analyst

Citi believes BP PLC (LSE:BP.) biggest turnaround opportunity lies in reshaping its upstream oil and gas business as new chief executive Meg O’Neill moves the company firmly away from its former renewables-led strategy. Following an analyst roundtable with O’Neill, the American bank said BP’s priority was now “re-building an integrated oil & gas company”, with its diluted pivot into electrons appearing to be in its final stages. Citi said upstream returns have lagged peers for several years, leaving considerable scope to improve performance through portfolio rationalisation and investment in new opportunities. BP currently produces oil and gas in 17 countries, compared with 19 for ExxonMobil, despite the US major being around twice its size. That suggests BP could streamline its long tail of assets and concentrate capital on its strongest operations. Notably, Brazil’s Bumerangue discovery was highlighted as a potentially significant growth opportunity as BP repositions its portfolio. Earlier this week, on Wednesday, in a trading statement ahead of its second-quarter results scheduled for early next month, the oil giant said net debt is expected to fall by at least $2.3 billion from $25.3 billion at the end of the first quarter, after repaying €2.5 billion of hybrid bonds and making a $1.1 billion payment related to Gulf of America settlement liabilities.