“We expect it to become increasingly evident over the coming 12 months that BP can deliver a material and sustained improvement in free cash flow,” Barclays analyst Lydia Rainforth said in a note.
“Project start ups already delivered at the end of 2017 should drive this improvement, with 2018 start-ups adding to the momentum towards year end. In the downstream, growth is set to come from a differentiated offering in both retail and lubricants and is still, for us, an under-appreciated part of the BP business model.”
“We also expect an even greater focus on the potential productivity gains that digitisation in the industry can drive and we see this as a $10bn opportunity for BP across both revenue and costs.”
The analyst added: “As investor confidence in the ability of BP to sustain and grow that dividend improves we expect to see the shares re-rate.”
BP is Barclays ‘top pick’ among the European oil stocks. It sees some 27% upside, but, added that there “will doubtless be bumps in the road” over the coming five years.