Berenberg raises target price on BP

Berenberg said BP delivered "a strong beat" and boosted share buybacks to $2.5bn in Q2, helped by an "exceptional" gas trading environment and sharply higher refining margins.

The German bank noted that gearing has been "materially lower" over the past two years, with net debt including leases falling from $55.0bn at the end of 2019 to $36.0bn at the end of the first quarter.

"We forecast the company generating a FCF yield of 22% for 2022E, and are currently modelling a $10.0bn buyback in addition to the dividend, providing a total shareholder return of around 13.5% for the year," said Berenberg.

While the analysts noted this "could be higher", they now anticipate that management will want to push gearing "comfortably below" 20% before ramping up shareholder distributions to more than 60% of the surplus cash.

"We continue to think there is material upside to the share price which in our view is not reflecting the potential cash generation of the business over the coming quarters," said Berenberg, which also reiterated its 'buy' rating on the stock.