RBC Capital Markets raised its rating on BP to "outperform" from "sector perform" on Monday and kept its 700p price target unchanged, arguing that the latest rally in commodity prices offers BP another opportunity to pare debt to levels more in line with its peers.
Shares of BP traded at 535.90p on the London Stock Exchange as of May 8, which RBC says implies roughly 31% upside to its maintained 700p target. The brokerage also outlined a downside scenario at 440p and an upside scenario at 840p.
"The current windfall presents a second chance for BP to de-leverage, and should help put the company on firmer footing for the coming years," RBC analysts wrote, framing the upgrade around the company’s ability to use stronger commodity earnings to reduce indebtedness.
RBC’s valuation and leverage workstreams rest on a Brent crude assumption of $91 per barrel for 2026. Under that price deck, the bank projects BP’s all-in net debt-to-CFFO ratio to fall from 2.2x in 2025 to 0.9x in 2026 and to 0.5x by 2027. For comparison, RBC sees TotalEnergies at 1.1x and ExxonMobil at 0.8x for 2027. Even under a lower Brent scenario of $70 per barrel, the brokerage forecasts BP’s leverage reaching 1.3x by 2027.
RBC noted that S&P placed BP on a positive outlook in early April. Using S&P’s adjusted net debt definition, which incorporates leases, hybrid securities and Macondo liabilities, RBC estimated BP’s adjusted net debt at roughly $58 billion at the end of 2025. That figure is projected to decline to about $42 billion by year-end 2026 and to around $33 billion by year-end 2027, a path that assumes a $2.5 billion buyback in 2027.
On earnings, RBC raised its 2026 EPS forecast for BP to $1.02 from $1.00, and nudged its 2027 EPS estimate to $0.84 from $0.80. Those projections sit 13% and 21% above consensus for 2026 and 2027 respectively, per the brokerage.
RBC also presented relative valuation metrics, estimating BP’s FCF/EV at 12.9% for 2026 versus a European peer average of 8.2% and a global average of 8.0%. The brokerage reported BP’s EV/DACF at 3.5x for 2026E against European peers at 4.8x. BP’s dividend yield is forecast at 4.7% in 2026 and rising to 5.1% by 2028. The 700p price target is derived from a 50/50 weighting between a sum-of-the-parts valuation and a normalized EV/DACF approach using a 5.5x multiple.
RBC flagged four principal risks to its constructive view:
- A shorter-than-expected period of elevated oil prices, which would reduce the cash generation underpinning de-leveraging;
- The potential renegotiation of the Castrol sale to Stonepeak, a transaction announced in December and expected to deliver $6 billion in cash;
- Disappointing results from the Bumerangue exploration well in Brazil;
- Management resuming buybacks before completing deleveraging, a scenario RBC described as "FOMO."
"Best not to get FOMO," the analyst Borkhataria wrote, adding that even if BP reported zero net debt on its own definition, liabilities such as hybrids, leases and Macondo payments would remain on the balance sheet.
Overall, RBC’s upgrade rests on a view that stronger commodity prices create a meaningful and timely window for BP to accelerate balance-sheet repair, lift cash returns and improve relative valuation metrics versus European and global peers.