Scotiabank Upgrades BP Stock Rating to Sector Outperform, Sets New Price Target of $42.00

BP has been upgraded to "Sector Outperform" by Scotiabank analyst Paul Cheng, with a new price target of $42.00 USD. This comes after a series of analyst activities on BP in recent months, including upgrades and downgrades from other firms. BP is an integrated oil and gas company with a history of exploration, production, and refining operations worldwide. The average one-year price target for BP is $36.40, with an upside of 6.10% from the current price. The estimated GF Value for BP in one year is $34.45, suggesting a 0.41% upside from the current price.

Scotiabank analyst Paul Cheng has upgraded BP (NYSE: BP) to "Sector Outperform" with a new price target of $42.00 USD, a significant increase from the previous target of $34.00. This upgrade comes on the heels of a series of analyst activities on BP, including recent upgrades and downgrades from other firms.

BP, an integrated oil and gas company with a global footprint, has been the subject of varied analyst opinions in recent months. The average one-year price target for BP stands at $36.40, with an estimated GF Value of $34.45, suggesting a 0.41% upside from the current price. Cheng's upgrade reflects a positive outlook on BP's upstream portfolio, particularly the Bumerangue block discovery offshore Brazil.

The Bumerangue block discovery, announced earlier this year, has been deemed transformative by Cheng. The size of the discovery and its attractive fiscal terms have substantially narrowed the valuation gap between BP and its European oil major peers. BP owns a 100% working interest in the block, with a standard PSC royalty rate of 15%, cost recovery ceiling of 80% of gross revenue, and a BP-to-government profit split of 94.1% to 5.9%. The project's long cycle time, with first oil likely not starting until 2031 or later, may limit immediate market impact, but the massive oil find addresses investors' concerns about the sustainability of BP's upstream portfolio.

Cheng also noted that BP expects to lay off 6,200 employees by the end of 2025, contributing to its cost reduction program starting in 2026. The analyst expects appraisal drilling results and the stem test at the Bumerangue discovery to further de-risk the project and provide additional catalysts for BP's shares.

In addition to the Bumerangue discovery, BP is also involved in a project to boost gas capacity in Oman. BP and its partners have started work to increase gas production capacity to supply Oman’s planned liquefied natural gas project. Block 61, where BP operates with a majority share of 40%, is expected to develop up to 2 trillion cubic feet of additional recoverable gas resources. Oman LNG produced a record of 12 million tonnes in 2024, up 15% from the previous year, earning a revenue of $6.5 billion.

These developments suggest a positive outlook for BP's future prospects, with the analyst upgrade and new project announcements potentially driving further interest in the company's shares.

References:
[1] https://seekingalpha.com/news/4485619-bp-upgraded-at-scotiabank-following-potentially-transformative-discovery
[2] https://www.agbi.com/oil-and-gas/2025/08/bp-and-partners-to-boost-gas-capacity-in-oman/