The BP share price closed yesterday’s trading session up by 0.43%, resuming its long-term bullish move that saw its value surge by over 30% last year. The price surge also resulted in the company paying decent dividends with a 4% yield. The positive start to the year has resulted in many speculating a similar run of fortunes in 2023.
BP Share Price Fundamental Analysis
BP p.l.c. (NYSE:BP), the integrated energy company, has seen a strong performance in recent years, with consistent revenue growth and a focus on reducing debt and increasing free cash flows. The company’s diverse range of operations, including exploration and production of oil and natural gas, refining and marketing of petroleum products, and renewable energy generation, have contributed to its strong financial health.
In terms of liquidity, BP has consistently maintained a current ratio above 1, indicating sufficient coverage of short-term liabilities with short-term assets. The company’s debt-to-equity ratio has also been consistently below 1, indicating a lower portion of debt relative to equity. These factors, along with a times interest earned ratio that has been attractive in most previous quarters, demonstrate the company’s ability to manage risk and meet its financial obligations.
Profitability has also been strong for BP, with the exception of the impact of the COVID-19 pandemic in 2020 and the Russia-Ukraine War in 2022. In Q3 2022, the company reported a replacement cost profit of $8.2 billion, despite weaker refining margins and lower liquids realizations. Operating cash flows for the quarter were also strong at $8.3 billion, including a working capital build of $6.2 billion.
In addition to its financial performance, BP has also demonstrated a commitment to reducing debt and increasing free cash flows. The company’s debt has been consistently falling in recent years, while free cash flows have been on the rise thanks in part to higher prices for oil and natural gas. BP’s efforts to reduce debt and generate higher free cash flows are expected to continue in the future, which should be welcomed by investors.
Overall, BP’s strong financial performance and focus on debt reduction and cash flow generation make it an attractive investment for many investors who expect the company to continue rising.
BP Price Forecast
As seen from the above fundamental analysis, BP’s financial health continues to signal continued growth into 2023. On the fundamental side, the recent price action is also aggressively bullish, with the company recording an over 30% price surge in the past year.
Therefore, for 2023, I expect the bullish trend to continue for the next few months of the year. There is a high likelihood that we might see the BP share price trading above the 500p price level again in the next few trading sessions. My long-term view of the company is that it will hit the 600p price level within the first quarter of the year. However, a drop below the 400p price level will invalidate my analysis.