In key news on UK stocks, BP PLC (GB:BP) shares declined over 3% as of writing, as S&P Global (NYSE:SPGI) downgraded the company’s credit outlook from Positive to Stable. S&P Global is a U.S.-based financial information and analytics company that assigns ratings through its division, S&P Global Ratings. The rating agency attributed the downgrade to BP’s slower-than-expected speed of debt repayment. Meanwhile, S&P maintained its “A-” long-term and “A-2” short-term issuer credit ratings for BP.
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BP is a global energy company engaged in the exploration, production, and distribution of oil and natural gas.
S&P’s Verdict on BP
S&P remains unimpressed by BP’s capital allocation strategy and doesn’t expect any meaningful reduction in the company’s debt. BP’s net debt increased to $24 billion in the first quarter of 2024 from $21.2 billion a year earlier.
Given BP’s growing shareholder returns over the last few years and its share buyback plans, S&P is concerned that the company will not be able to significantly reduce its debt. Moreover, S&P noted that BP’s balance sheet, compared to its competitors like Shell (GB:SHEL), Chevron (NYSE:CVX), and others, continues to display weakness, with the gap expected to widen further.
A Setback for BP’s Stability Plan
The rating cut by S&P is a setback for BP, as the company is trying to adopt a steady approach after the appointment of its new CEO, Murray Auchincloss, in January 2024. Auchincloss has been focusing on streamlining BP’s operations and reducing costs to regain investor trust. However, the numbers tell a different story.
Earlier this month, BP announced its Q1 2024 results, which were impacted by lower oil and gas prices and weaker fuel margins. The company’s profit attributable to shareholders decreased to $2.3 billion in Q1, a significant drop from the $8.2 billion recorded in the year-ago quarter.
Is BP Stock a Good Buy Now?
According to TipRanks consensus, BP stock has received a Moderate Buy rating based on nine Buys, one Hold, and one Sell recommendation from analysts. The BP share price forecast is 640p, which implies an upside potential of 37.6% at the current trading level.
