BP PLC is a company that conducts its business in the energy industry through three key segments, namely Rosneft, Upstream, and Downstream. The company was launched in 1889 and has its headquarters in London. Its Upstream segment deals with natural gas and oil exploration, as well as production and field development. This business segment also transports, stores, and processes oil and natural gas. It also markets and sells natural gas liquids, power, and biogas.
The upstream segment also handles management and ownership of the natural gas and crude oil pipelines as well as export terminals and processing facilities. The Downstream segment deals with refining, manufacturing, supply, transport, and marketing petrochemical products, petroleum, and crude oil to retail and wholesale clients. Some of its products include aviation fuels, gasoline, lubricants, and diesel sold to the energy, marine, industrial and automotive markets under the Aral and Castrol BP brands.
The Rosneft segment produces bitumen, bunkering, lubricants, jet fuels, and hydrocarbons. The segment runs and owns 13 refineries located in Russia, as well as 3,000 service stations. Some of its other activities include transporting hydrocarbon products, solar power generation, and bio-power production.
Price target and analyst rating
24 analysts have from Wall Street contributed to BP’s 12-month price target and ratings. Their current consensus price target is $27.69 with a 6.05% potential upside. The stock's highest price target is $31.00, while the lowest price target is $21.00. 14 of the 24 analysts have a buy rating on the stock, while 9 of them have a hold rating and the remaining 1 is a sell rating.
Like many energy industries that have been around for decades, BP attracts a mix of investors, including some of the most popular institutional investors in the U.S, such as banks and investment funds. Fisher Asset Management is BP’s largest institutional investor with 10.93 million BP shares. Popular Investment bank Goldman Sachs is the energy company's second-largest institutional investor with 8.56 million shares, with Blackrock a close third with 8.15 million shares.
BP’s financial summary
Although BP operations are immense, one of its biggest problems is its huge debt profile. Its net debt by the end of Q3 2020 was $40.4 billion, which might be concerning for investors because it means that a significant amount of revenue has to be put towards its debt obligations. BP plans to dispose of $25 billion worth of assets by 2025 to draw down its debt.
The decision to sell some of its assets is also timely because it will allow the company to free up more cash invested in renewable energy. BP recovered $5 billion from the sale of its petrochemical unit in 2020. The sale provided some cushioning against the heavily disrupted oil prices during the year. Investing more money into renewable energy should be a major priority for the company, especially now that many countries implement strict emission standards. These measures aim to phase out internal combustion engines in favor of propulsion powered by renewable energy, thus requiring companies like BP to start strategizing for the future.
Oil spills such as the Deepwater Horizon spillage in 2010 and the Gulf of Mexico's major oil spill cost the company a lot of money in fines. BP has so far paid a total of $70 billion. 2020 was particularly challenging for the company as demand dropped due to the pandemic.
BP has a vast portfolio of oil and gas products, but recent reports indicate that it is increasingly interested in renewable energy. It revealed plans to invest heavily in building capacity to generate 50 gigawatts of renewable energy. Its latest announcements also highlight the company's plans to maintain a strong presence in the automotive industry.
Most of the fuel that BP produces from non-renewable sources is used to fuel vehicles. The company plans to continue providing energy for the automotive industry by setting up fast charger networks. It already announced plans to create such a network in Germany after BP Chargemaster secured a contract to provide 1,000 charging stations for Scotland police. The announcement might highlight the company’s plans in many other markets across the world as part of its plans to tap into revenue growth opportunities in the renewable energy segment.
Despite the growing focus on renewable energy, BP plans to continue serving natural gas demand, especially in South Asia and southeast Asia. The company recently announced plans to commence natural gas production in India, with plans to address 15% of India's gas demand by 2023. The company is optimistic about its prospects in the gas market, especially with the expectations of continued increase in demand.