BP PLC (BP): what the price assumes
boothcheck covers BP PLC (BP) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-07-25.
Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/BP
Headline
| Field | Value |
|---|---|
| Ticker | BP |
| Company | BP PLC |
| Sector / Industry | Energy |
| Current price | $43.41/sh |
What The Price Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 2.1% |
| Operating margin today | 6.7% |
| Margin compression (value-band) | -4.6pp |
| Multiple paid | 10x operating income |
The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 6.9% sits below it).
Reconcile: at the x-ray's 9.3% required return this reads ~-3.8%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.16σ |
| cohort percentile (of 46 peers) | 22 |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 5.52x | 4 | expensive |
| Earnings | 1.86x | 4 | expensive |
| Relative | 1.88x | 5 | expensive |
| Growth | 1.17x | 4 | expensive |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.2%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | — | — | no | — |
| DCF Exit Multiple | Growth | $82.00 | 0.53x | yes | Exit EV/EBITDA: 4.0x / 6.8x / 11.8x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $23.06 | 1.88x | yes | P/E 22x (blended: static sector reference 10x + trailing (TTM) 92x), scenarios: 16.5x / 22.0x / 26.4x (bear / base = reference held flat / bull), EV/EBITDA 6x |
| Simple DDM | Growth | $27.85 | 1.56x | yes | DPS $2.05, g=1.8% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3% |
| Two-Stage DDM | Growth | $39.43 | 1.10x | yes | Stage 1: 5% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $5.12 | 8.48x | yes | BV/sh $27.07, ROE (TTM) 1.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $2.83 | 15.34x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $35.04 | 1.24x | yes | Rev $192.5B, growth 7% (input: historical growth; tapered), Terminal P/S: 0.5x / 0.6x / 0.7x (bear / base = today's held flat / bull, cap 6x) |
| Peter Lynch Fair Value | Relative | $5.69 | 7.63x | yes | EPS $0.47, growth 2% (input: historical EPS growth), PEG=45.81 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $49.70 | 0.87x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $17.48B × (1−21%) / WACC 6.2% → EPV (no growth) |
| Residual Income | Asset | $2.04 | 21.28x | yes | BV $27.07 + 5yr PV of (ROE (TTM) 1.8% − Kₑ 9.3%) × BV; BV grows 1.1%/yr (excluded from median) |
| Graham Number | Asset | $16.99 | 2.56x | yes | √(22.5 × EPS $0.47 × BVPS $27.07) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $34.90 | 1.24x | yes | EBITDA $30.46B × sector EV/EBITDA 6.0x |
| FCF Yield | Earnings | $64.90 | 0.67x | yes | FCF $24493.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $15.29 | 2.84x | yes | EPS $0.47 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $27.08 | 1.60x | yes | BV $27.07 × (ROIC 6.2% / WACC 6.2%) |
| P/Sales Sector | Relative | $84.53 | 0.51x | yes | Revenue $192.55B × sector P/S 1.2x |
| PEG Fair Value | Relative | $17.77 | 2.44x | yes | EPS $0.47 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $5.12 | 8.48x | yes | EPS $0.47 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $18.0b |
| Net debt / NOPAT (after-tax) | 1.81x |
| Net debt / operating income (pre-tax) | 1.43x |
| Interest coverage | 2.5x |
| Burning cash | no |
Bullet Takeaways
- Today's quote values BP at roughly 5.2 times the operating profit it produced over the last twelve months, a multiple that asks the business to grow not at all.
- The balance sheet is the binding constraint: the FY2025 annual report puts net debt at 22.2 billion dollars against a stated target of 14 to 18 billion dollars by the end of 2027, and the company suspended its quarterly share buyback in February 2026 to close that distance.
- The next read is second-quarter results on 4 August 2026, with roughly 9 to 10 billion dollars of 2026 disposal proceeds guided to arrive mostly in the second half.
Bull Case
The methods disagree about BP more violently than they disagree about almost anything else, and the shape of the disagreement is the argument. Value the company on the cash it actually produced and every one of those approaches reaches past today's quote, one of them to nearly double it. Value it on last year's reported bottom-line profit per share, or on the book value left after a decade of writedowns, and the same exercise lands far under the price. Those are not two views of BP. They are two views of which year counts.
For a company that sells a commodity it does not price, the year that counts is rarely the one just filed. Over the trailing period BP generated roughly 24.5 billion dollars of free cash flow, and a five-year average of operating profit with one-time charges added back sits near 17.5 billion dollars. Those are the numbers a buyer of the whole company would work from. The reported bottom line for the year came in far below operating profit after impairments and charges, which is what happens when a business writes down long-lived assets in a weak price environment. Impairments are real. They are also, mostly, the recognition of past capital decisions rather than a statement about next year's cash.
Management has stopped arguing about direction. The FY2025 annual report sets out three priorities in order: growing the upstream oil and gas business, focusing the downstream, and investing in the transition with discipline. Attached to that are targets a reader can hold the company to: net debt of 14 to 18 billion dollars by the end of 2027, cumulative structural cost reduction of 5.5 to 6.5 billion dollars by the same date against 2.8 billion dollars already banked since 2023, and adjusted free cash flow compounding at better than 20% a year from 2024 to 2027. None of that requires a new technology or a new market. It requires the company to spend less and sell what it does not need.
The payout is the part of this that is not in dispute. BP states plainly that The resilient dividend is our first capital allocation priority, and it has been raising it: For the second quarter 2025, our dividend per ordinary share increased by 4% from 8.000 to 8.320 cents. On a trailing basis that comes to about $2.05 per American share. Operating income covers the interest bill about 6.5 times over, so the dividend is not being funded from a stressed balance sheet, whatever else is true about the debt level.
One old weight has finally come off. On the 2010 Gulf of Mexico spill, the filing now states that Any outstanding Deepwater Horizon related claims are not expected to have a material impact on the group's financial performance. Sixteen years of settlement payments shaped BP's balance sheet, its disposal program and its capital discipline. That chapter closing does not make the company cheap. It does mean that from here, the cash the upstream generates belongs to the business and its owners rather than to a claims fund.
Bear Case
In February 2026 BP stopped buying back its own shares. Nothing management has said about the business is as informative as that decision. The stated order of priorities did not change, and the annual report still puts the dividend first among the uses of cash. What changed is the size of what is left after it. A company earning a multiple this low, with a payout it has committed not to cut, and a debt target it is not currently on the path to hit, has exactly one lever that does not involve disappointing someone: sell things.
So it is selling things. The plan is roughly 20 billion dollars of disposals by the end of 2027, with 9 to 10 billion dollars of proceeds guided for 2026 alone, about 6 billion of that from handing 65% of the Castrol lubricants business to Stonepeak at a 10 billion dollar enterprise value. In July 2026 it agreed to sell most of its venture portfolio to Verdane. Castrol is a branded, high-return, low-cyclicality business, which is precisely why it sells well and precisely why selling it is expensive. The dividend gets paid. The company that pays it gets smaller and more cyclical.
The debt itself has not cooperated. The FY2025 annual report puts net debt at 22.2 billion dollars against finance debt of 58.0 billion dollars, and BP explains its own measure this way: Net debt enables investors to see the economic effect of finance debt, related hedges and cash and cash equivalents in total. That definition excludes lease obligations, and a build that includes them lands materially higher. By the end of the first quarter of 2026 the figure had risen to 25.3 billion dollars. Halting the buyback did not stop the number going the wrong way in the very next quarter.
There is a floor under all of this, and it deserves an honest treatment. Roughly 20.7 billion dollars of BP's enterprise value sits in equity stakes and investments held outside the operating business, about a sixth of the company's market value, and that is a genuine boundary on the downside rather than a source of upside. It is also not a guarantee. BP has already demonstrated what happens to such a holding under stress: on its Russian interests the filing states that it is not currently possible to estimate any carrying value other than zero when determining the measurement of the interest in Rosneft and the other businesses with Rosneft within Russia as at 31 December 2025. A stake carried at a number is worth that number until a government decides otherwise.
The structural risk sits behind all of it and BP names it in its own risk language: Broader structural shifts, such as the pace of the energy transition, evolving climate policy, carbon pricing mechanisms, consumer preferences, and the realignment of global energy trade (e.g. LNG flows, carbon border adjustments) may lead to enduring changes in market conditions, and Competition over critical minerals and low carbon technologies is increasingly geopolitical, shaping access to resources and markets. Strip the register and the point is simple. BP has now bet its capital program on oil and gas volumes growing through the end of the decade, after spending the prior five years telling investors the opposite. Whichever of those two strategies is right, the company has paid the transition costs of both.
Which brings the bear back to the multiple. Roughly 5.2 times operating profit is not a demanding price, and no reasonable case says the shares are expensive against the cash of a good year. The bear case is that the market is not mispricing the cash. It is discounting the durability of it, in a business whose reported earnings can be erased by a price deck and a writedown, whose asset base is being sold to fund a payout, and whose net debt is rising while it does so.
Valuation
At $43.82 the market is paying about 5.2 times the operating profit BP produced over the trailing year. Run that backwards and no expansion assumption is required at all. Shrink operating profit by 5% a year, discount at a 7% cost of capital over a five-year stage with a 4% terminal rate, and the arithmetic still supports more than today's quote. That is a bound rather than a solved figure, and it is worth stating as a bound: whatever the price is betting on, it is not the business getting bigger.
The methods split along a fault line that is diagnostic rather than confusing. Approaches anchored on cash and on operating profit all reach past the price. The exit-multiple cash-flow method gets there by holding today's EV/EBITDA multiple flat through the projection, compressing it in the bear scenario and expanding it in the bull. The method that simply capitalizes reported free cash flow, about 24.5 billion dollars of it, reaches well beyond the price on no growth at all. So does the normalized-earnings-power approach, built on a five-year average of operating profit near 17.5 billion dollars with one-time charges added back. Against that, the price sits about 18% above where the forward cash-flow family as a whole lands, and far above where the book-value approaches land.
That last group is where the reader should slow down. The book-value and per-share-earnings methods run off a reported profit figure that a single impairment cycle can flatten, and off a balance sheet a decade of writedowns has already trimmed. Book value per share sits near 27 dollars, so the shares change hands at a little over one and a half times what the accountants say the equity is worth. For an integrated oil company carrying proved reserves at historical cost, that is not an obviously stretched relationship. The methods are not wrong. They are measuring the wrong year.
Solvency is the constraint that shapes everything else here, and BP reports it on its own basis: Net debt enables investors to see the economic effect of finance debt, related hedges and cash and cash equivalents in total. On that measure the FY2025 annual report shows 22.2 billion dollars of net debt against 58.0 billion dollars of finance debt, with a target range of 14 to 18 billion dollars by the end of 2027. A build that also counts lease obligations lands materially above the reported figure. Operating income covers the interest bill about 6.5 times over, which is comfortable, and the dividend, at 8.320 cents per ordinary share per quarter, is the first claim on cash by the company's own stated policy.
What the price is actually expressing is a judgment about repeatability. The cash-based methods say the trailing year, capitalized, is worth more than $43.82. The market is paying less than that because it is not underwriting the trailing year: it is underwriting a price deck, a disposal program that shrinks the asset base, and a debt figure that has to come down by roughly a third in under two years.
Catalysts
The first quarter of 2026 was strong, and it was strong in the parts of BP that are hardest to forecast. Underlying replacement cost profit came in at $3.2 billion against $1.4 billion in the same quarter of 2025, helped by upstream reliability of 95.7%, refining availability of 96.3%, and an exceptional contribution from oil trading. Trading results of that kind are genuinely valuable and genuinely non-recurring, which is why a reader should treat a quarter like that as evidence about capability rather than about run rate.
The capital allocation news of the year came earlier. In February 2026 BP halted its quarterly share buyback and deepened its cost-reduction goal, redirecting cash toward the balance sheet. Net debt still rose over the following quarter, to $25.3 billion at the end of March from 22.2 billion dollars at year end. The disposal program is the mechanism meant to fix that: 9 to 10 billion dollars of proceeds guided for 2026, roughly 6 billion of it from the agreed sale of 65% of Castrol to Stonepeak at a 10 billion dollar enterprise value, weighted heavily to the second half. In July 2026 BP also agreed to sell most of the bp Ventures portfolio to Verdane.
Second-quarter results are due on 4 August 2026. Two lines will matter more than the headline profit: whether disposal proceeds are actually landing on the schedule management has guided, and whether net debt has turned. The quarterly dividend of 8.320 cents per ordinary share, paid on 26 June 2026, is the commitment everything else is being arranged around.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- TTE (TTE)
- (no filing in the citation store)
- PBR (PETROBRAS - PETROLEO BRASILEIRO SA)
- FY2025 20-F: …condition and the value of our Proved Reserves. Since 2023, when we announced the approval of our commercial strategy for setting diesel and gasoline prices, we have the commercial strategy that uses market references such as: (a) the customer's alternative cost, as the value to be prioritized in pricing, and (b) the…
- FY2025 20-F: Annual Report and Form 20-F 2025 I 25 We currently divide our business into three main segments: § Exploration & Production (E&P): this segment covers the activities of exploration, development and production of crude oil, NGL and natural gas in Brazil and abroad, for the primary purpose of supplying our domestic…
- E (E)
- FY2025 20-F: …competition. As commodity prices are not within Eni's control, Eni's ability to remain competitive and profitable in this environment requires continuous focus on technological innovation, efficiencies in operating costs, effective management of capital resources and the supply of valuable services to energy buyers.…
- FY2025 20-F: …to SEC on April 4, 2025. 30 Table of Contents BUSINESS OVERVIEW Exploration & Production Competitive trends in the industries where the Company operates In the Exploration & Production segment, Eni is facing competition from both international and state-owned oil companies for obtaining exploration and development…
- WKC (World Kinect Corporation)
- FY2025 10-K: …are highly fragmented with numerous competitors. Our competitors range from large multinational corporations, which have significantly greater capital resources than us, to relatively small and specialized firms that compete with us in a particular line of business. In our fuel distribution activities, we compete…
- FY2025 10-K: …specialized firms that compete with us in a particular line of business. Industry developments, such as fuel price transparency, procurement technology tools, increased regulation and increasing customer sophistication may, over time, reduce demand for our services and thereby exacerbate the risks associated with…
- SLB (SLB LIMITED/NV)
- FY2025 10-K: …Operations and Platforms & Applications. Digital pretax operating margin expanded 557 basis points sequentially to 34%, reflecting improved profitability from strong Digital Exploration activity, robust growth in Digital Operations, and higher Platforms & Applications revenue. Reservoir Performance Reservoir…
- FY2025 10-K: …and the achievement of fully autonomous drilling operations. Digital Digital revenue of $2.4 billion increased 20% year on year driven by the accelerated adoption of digital technologies and higher sales of exploration data. Digital & Integration pretax operating margin of 25% increased 710 bps year on year primarily…
- EC (ECOPETROL S.A.)
- FY2025 20-F: 4,830 0 6 Energy Transmission and Toll Roads Concessions Operating Income 6,492 7,656 6,645 (15) 15 Net profit 451 966 674 (53) 43 Eliminations of consolidations Operating Income 42 20 81 113 (75) Net profit 1 9 (4) (89) (291) Total …
- FY2025 20-F: …analysis on our results of operation to exchange rate fluctuations in the section Financial Review-Effect of Taxes, Exchange Rate Variation, Inflation and the Price of Oil on our Results-Exchange Rate Variation and in Note 30.1 to our consolidated financial statements. Increased competition from local and foreign oil…
- EOG (EOG RESOURCES, INC.)
- FY2025 10-K: 's competitors have financial and other resources substantially greater than those EOG possesses and have established strategic long-term positions or strong governmental relationships in countries or areas in which EOG may seek new or expanded entry. As a consequence, EOG may be at a competitive disadvantage in…
- FY2025 10-K: …in 2024, one totaling $ 2.9 billion, another totaling $ 2.6 billion and a third totaling $ 2.5 billion of consolidated Operating Revenues and Other in the United States segment. (5) EOG had sales activity with three significant purchasers in 2023, one totaling $ 3.3 billion and two others totaling $ 2.6 billion each…
- OXY (OCCIDENTAL PETROLEUM CORPORATION)
- FY2025 10-K: …hydrocarbon pricing and demand. The Company pursues capital-efficient production through conventional and unconventional field development, employing primary, secondary (waterflood), and tertiary (e.g., CO₂ and steam flood) recovery methods in areas where it has established advantages. The Company focuses on safe,…
- FY2025 10-K: …of its gathering, processing, transportation, storage and terminal commitments and by providing the oil and gas segment access to domestic and international markets. To generate returns, the segment evaluates opportunities across the value chain and uses its assets to provide services to Occidental's subsidiaries, as…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
BP fourth quarter and full year 2025 results, February 10, 2026 · BP first quarter 2026 results, April 28, 2026 · BP first quarter 2026 results, April 28, 2026; BP press release on the Castrol transaction · BP press release, July 2026 · BP dividend announcement, first quarter 2026