Berenberg downgrades BP after strong share price performance

The bank said upside risks remain, linked to the high cash returns and any further speculation around BP being a bid target, but it is downgrading after the strong share price performance.

It noted that BP announced a new strategy at its FY22 results on 7 February, slowing the pace of the planned divestment of the upstream business while pledging to invest more in both its upstream business and in low-carbon technologies.

Growth and ROACE (return on average capital employed) targets were also upgraded, Berenberg said, partly due to higher commodity price assumptions and partly due to the extra investment.

"The stock reacted extremely positively to the update, rising 17% in three trading days, helped in our view by speculation regarding potential acquisition interest from US oil majors," it said.

"We view the update as positive from a shareholder perspective, but we believe the company’s strategy is now more closely aligned to peers - while its valuation has moved to a premium."