BP's upstream pivot opens $20B turnaround opportunity, Citi says

BP's priority is now rebuilding an integrated oil and gas company, with upstream returns that have lagged peers for several years offering considerable scope for improvement through portfolio rationalization and investment in new opportunities, Citi analysts said after a roundtable with O'Neill.

"BP's upstream returns have lagged peers for several years, leaving considerable scope to improve performance through portfolio rationalization and investment in new opportunities," Citi analysts said.

BP currently produces oil and gas in 17 countries, compared with 19 for ExxonMobil despite the US major being roughly twice its size, suggesting the British company could streamline its long tail of assets and concentrate capital on its strongest operations. Brazil's Bumerangue discovery was highlighted as a potentially significant growth opportunity as BP repositions its portfolio. The company is also embarking on a $20 billion divestment plan aimed at cutting debt and boosting returns, and net debt is expected to fall by at least $2.3 billion from $25.3 billion at the end of the first quarter.

The strategic reset comes as O'Neill — Big Oil's first female chief executive and BP's first external hire for the top job — consolidates authority after the abrupt dismissal of Chairman Albert Manifold in May over governance concerns. With three CEOs in as many years and a share price that has underperformed rivals, BP's ability to execute its upstream-focused turnaround will determine whether it can close the valuation gap with peers like Shell and ExxonMobil.

O'Neill, who joined from Australia's Woodside Energy Group on April 1, announced just two weeks into her role that the company would return to a more traditional upstream-downstream model, reversing changes made under former CEO Bernard Looney. Looney was forced by BP's board to step down in September 2023 after he failed to disclose past relationships with colleagues, marking the beginning of a turbulent period that saw the company's ill-fated foray into renewables unwind.

A $20 billion divestment plan to reshape the portfolio

BP's divestment program targets debt reduction and improved returns as the company refocuses on core oil and gas investments. The company repaid €2.5 billion of hybrid bonds in the first quarter and made a $1.1 billion payment related to Gulf of America settlement liabilities. BP has also proposed closing its venturing arm BP Ventures, which began in 2007 and held 27 companies in its portfolio, and reached an agreement to sell minority interests in more than 10 companies to investment firm Verdane. The divestment is expected to complete by the second quarter of 2027.

However, a decision to suspend share buybacks in February left BP as the only one of the top five oil majors without a share repurchase program, a move that weighed on investor sentiment. BP's shares had outperformed some rivals earlier this year as the company moved to shore up its balance sheet, but the buyback suspension and governance turmoil have kept the stock under pressure.

Can O'Neill deliver where predecessors failed?

The leadership churn — three CEOs in as many years — has raised questions about BP's governance and strategic direction. Manifold's predecessor, Helge Lund, left in 2025 after pressure from activist investor Elliott Investment Management. The renewed uncertainty could revive speculation about BP becoming a takeover target, though rival Shell announced last year it had no intention of making a bid. Shell has since agreed to buy Canadian oil and gas producer ARC Resources Ltd. for $13.6 billion, highlighting the industry's consolidation trend.

For BP, the path forward hinges on execution. Citi's endorsement of the upstream strategy provides analyst-level validation, but the company must demonstrate improved returns and capital discipline to win back investor confidence. With a resurgent share price so far this year, BP is beginning to take credit for its strategic reset — but the governance turmoil and absence of a buyback program leave it vulnerable if execution falters.

This article is for informational purposes only and does not constitute investment advice.