Wells Fargo Upgrades BP to Overweight and Cuts ExxonMobil to Equal Weight
Wells Fargo raised its rating on BP to overweight and increased its price target from $48 to $57, while downgrading ExxonMobil to equal weight and maintaining a $182 price target, hk.investing.com reported. Analyst Sam Margolin stated that relative valuations are moving in favor of the British energy giant as it accelerates debt reduction and resource development.
Margolin noted that the 2027 enterprise value to EBITDA multiple for BP is nearly half that of its American peers. Historical patterns suggest this valuation gap indicates BP stock will outperform the broader market over the next 12 months. The analyst expects BP’s valuation to catch up with competitors as the sale of its Castrol business improves its balance sheet and its oil and gas trading operations maintain strong performance.
Wells Fargo projects that BP’s financial debt will drop to approximately $6.2 billion by the end of 2026. This reduction will be driven rapidly in the second half of the year by cash flow and proceeds from the Castrol divestment. Margolin previously rated BP as equal weight due to cash flow pressures stemming from leases, hybrid debt, and environmental liabilities.
Trading Performance and Market Environment Factors
BP reported that its oil trading performance this year has been exceptional, surpassing historical results. With spot prices returning to roughly $120 per barrel alongside increased volatility in diesel spreads and widening natural gas spreads, Margolin projects that robust trading results will continue.
Regarding ExxonMobil, Margolin stated that despite timing factors and external headwinds in 2026, including losses in Qatar, the company’s overall operations remain solid. He anticipates fewer future disruptions for ExxonMobil but sees greater upside potential for BP, noting that the valuation premium currently enjoyed by ExxonMobil is likely to narrow.
