JPMorgan upgraded BP (LSE:BP.) to Overweight from Neutral and raised its price target to 675 pence from 550 pence as the bank revised its ratings across European oil companies.
The bank also downgraded TotalEnergies (LSE:TTE) to Neutral amid its reassessment of sector valuations and commodity price conditions.
JPMorgan’s Overweight-rated European oil companies now include Shell, BP, Eni and Galp.
“Absolute performance is now +20% USD since the Middle East conflict began and recognition of faltering commodity inventories is rising,” analyst Matthew Lofting said in a note.
JPMorgan Raises BP Price Target to 675 Pence
Lofting said BP’s “recent history has been chequered” by operational and strategic inconsistencies and balance sheet constraints.
The analyst said commodity market conditions and BP’s restructuring programme now present “a major opportunity to lower macro procyclicality and high-grade fundamentals into 2028.”
JPMorgan expects BP’s deleveraging to begin accelerating from the second half of 2026. Under the bank’s base case of Brent crude at no more than $75 a barrel, it expects BP’s gearing metrics to move in line with peers by the end of 2027.
The bank estimates that BP’s restructuring programme represents value equivalent to a high-single-digit percentage compound annual growth rate in underlying earnings per share over three years.
JPMorgan Estimates 11% BP Free Cash Flow Yield for 2027
JPMorgan estimates BP could generate a free cash flow yield of 11% in 2027 based on Brent crude at $75 a barrel.
The bank estimates BP’s oil-price sensitivity at approximately 180 basis points for every $10-per-barrel change in crude prices.
According to JPMorgan, BP also has the highest refining sensitivity among Europe’s large-cap oil companies. The bank noted that refining margins are currently around three times their normal mid-cycle levels.
TotalEnergies Downgraded to Neutral
JPMorgan downgraded TotalEnergies to Neutral, although Lofting said the company’s long-term fundamentals “remain well placed.”
The analyst cited multi-year growth supported by the company’s balance sheet and said he had no specific concerns ahead of TotalEnergies’ upcoming Investor Day.
JPMorgan estimates TotalEnergies’ 2027 free cash flow yield at 9.0%, representing a premium of between 100 and 150 basis points to UK oil majors.
The bank said this suggests TotalEnergies’ “industrial strength is somewhat priced in.”
JPMorgan Cites Three Factors in TotalEnergies Rating Change
Lofting identified three considerations behind the TotalEnergies downgrade.
These included the company’s greater direct exposure to Middle Eastern assets amid disruption risks around the Strait of Hormuz, as well as a moderation in underlying exploration and production volume growth to 3% year over year from 4% during the first half.
JPMorgan also cited potential developments associated with France’s domestic political and budgetary calendar, including the possibility of renewed debate over windfall taxes on the energy sector.
JPMorgan Assesses Impact of Higher Oil Prices
Across the European oil sector, JPMorgan estimated that forward free cash flow yields could reach 20% or more if oil prices of $100 a barrel and historically elevated refining margins were sustained.
The bank also identified the possibility of European windfall taxes as a factor that could affect the sector under such a scenario.
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