Barclays says investors wrong to fret about shareholder returns at BP

Analysts at Barclays upped their target price for shares of oil major BP, telling clients that the capital outlays needed to transition towards renewable energies would not come at the cost of its near-term shareholder returns.

"Long-term stewardship requires that the company evolves alongside the society that it is ultimately there to provide energy for," they said in a research note sent to clients.

"In theory, the company offers investors the vision of what a future energy group should look like - lower carbon, more stable earnings and less reliance over time on oil and gas."

Yet some investors were seemingly fretting that BP's plans to slash its output of fossil fuels by 40% by 2030, together with a ramp-up in low-carbon spend would depress cashflows in the near term.

"Our own analysis shows that an improved mix of barrels, combined with the cost-savings programme, is set to leave upstream cashflow at least unchanged to 2025, even with the disposals," they retorted.

"Add to this the growth in overall corporate cashflow from the consumer business, and the implied 13.9% [free cash flow yield] yield on which we estimate the stock trades, and we see a compelling investment case."

Barclays therefore revised its target price from 400.0p to 475.0p while reiterating its 'overweight' stance for the group's shares.