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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

BP shares: will February’s bullish momentum persist through March?

The last quarter has seen the BP share price re-emerge on an upward trajectory after posting a $5.7 billion full-year loss at the end of Q4. What factors may help maintain this momentum?

  • BP sells-off interest in Omani gas field for approximately $2.6 billion
  • Divestment strategy targeting asset sell-off worth $25 billion by 2025
  • US re-joining the Paris climate accord could have implications for the BP share price
  • Looking to trade BP shares online? Open an account today

The share price of BP (BP.L) recovered by 9% last month to 291.75p. The price bounced after plummeting to 193.44p at the end of October 2020, following the announcement of the company’s full-year (FY) accounts.

The loss of 10,000 jobs and a $15 billion write-down in June 2020 were a necessary restructuring to enable the oil giant to survive the Covid-19 pandemic, and meet the challenge of tackling climate change head-on. Alongside this, since BP shares fell to levels not seen in a quarter-of-a-century, there has been reason for cautious optimism in recent weeks.

Will BP’s divestment strategy benefit the company share price?

Last month, BP opted to sell a percentage of its interest in an Omani gas field for approximately $2.6 billion. Aside from raising funds for the BP coffers, the sale also aligns with the company’s divestment strategy aimed at generating $25 billion from asset sell-offs by 2025. The Omani gas field sale takes BP over the halfway mark towards its target with four years remaining. Last summer’s $5 billion sale of its petrochemical business to Ineos Ltd has also been a major boon.

Its divestment can only be good news for the company’s net debt too. A target for a net debt has also been established at $35 billion, which BP believes it can reach no later than Q1 2022. The oil giant publicly confirmed that it intends to rebuy shares once this figure is met, with buybacks likely to have positive consequences for its share value.

The company's approach to divestment will aim to strengthen the calibre of its gas and oil portfolio by letting go of weaker assets. BP’s management will also have the capital to invest and grow its renewable energy business, which aims to have a capacity of 50GW by 2030.

Could the Paris climate accord and BP’s green transition help shares to rally?

The return of the US to the Paris climate agreement can only be good news for the global efforts towards environmental justice. While BP shares may have already been priced in the US’ return to the Paris climate accord, following the arrival of US president Joe Biden, the Democrats’ green agenda could also play nicely into the hands of the company’s green business arm. There is potential for the US government to legislate more on renewable, with the low-carbon energy demand helping to broaden BP’s target market.

Another cause for optimism is the company’s easing dependence on high oil prices per barrel. Its divestment strategy is helping to reduce total operating costs to such an extent that a break-even price for BP will soon be $35 per barrel. For comparison, on 3 March, 2020, the price of Brent crude oil (CRU) was sitting at around $63 per barrel.

Keen to trade the BP share price after rebounding from its lowest levels since the mid-1990s?

Take your position on UK shares for just a small initial deposit with spread bets or CFDs. Spread bets are completely tax-free, while CFDs are free from stamp duty.1 You can also buy and take ownership of UK shares for just £3 with us.2

Open an account to start trading or investing in UK shares.

Footnotes:
1 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
2 Deal three times or more in the previous month to qualify for our best rate.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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