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

• 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.

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