BP share price forecast as it sells Castrol to Stonepeak Partners

BP share price has pulled back in the past few weeks as investors have watched energy prices dip. The stock was trading at 427p, down by 10% from its highest point in November. So, will the stock rebound after the company starts its divestments?

BP PLC made its first step in its divestment strategy

BP share price will be in the spotlight after the company announced a deal to sell a large stake in its Castrol business. In an announcement, the company said that it will sell its majority stake to Stonepeak Partners in a deal valuing it at $10.1 billion.

BP will net about $6 billion in cash from the transaction and remain as a minority investor. This sale is part of the company’s turnaround strategy that seeks to unload businesses worth over $20 billion in the coming years.

BP is hoping that these asset sales will help to simplify its business at a time when its stock has lagged behind other companies in the energy industry, like ExxonMobil, Shell, and Chevron.

It also expects that its asset sales will help it reduce its leverage and boost shareholder returns. The last point is notable as the company reduced its quarterly share buyback to between $750 million and $1 billion, down from $1.75 billion. 

BP has also made other things as part of its turnaround strategy. It scaled down its clean energy ambitions, and this month, the company announced a major management change. It poached Meg O’Neill from Woodside to become its CEO. 

She replaced Murray Aunchincloss, whose turnaround strategy received a lukewarm reception from investors. 

The most recent results showed that the company made a replacement cost profit of $2.2 billion in the third quarter and $3.8 billion in the first nine months of the year. It also made an operating cash flow of $7.8 billion, and is working to reduce its net debt to between $14 billion and $18 billion by the end of 2027. 

Is BP a good stock to buy?

BP’s main risk is that energy prices may remain under pressure in the foreseeable future. Brent and the West Texas Intermediate (WTI) have dropped by 25% from their highest point this year, and technicals point to more downside. 

BP, like other companies in the energy industry, does well when oil prices are rising and vice versa.

On the positive side, BP’s history of underperformance has left it severely undervalued compared to its rivals. As a result, the ongoing turnaround strategy will likely help it to boost its performance. 

READ MORE: BP is ‘certainly a takeover target’, market expert says

BP share price technical analysis

The daily chart shows that the BP stock price bottomed at 315p in April and then rebounded to a high of 470p. This rebound was a bet that the company’s turnaround strategy would work out well. 

Recently, however, the stock has pulled back after it formed a double-top pattern, one of the riskiest signs in technical analysis.

It has moved below the ascending trendline that connects the lowest swings since April last year. It also moved below the 100-day Exponential Moving Average (EMA) and 61.8 Fibonacci Retracement level.

Therefore, the most likely BP stock price forecast is bearish, with the next key support to watch being at the 50% Fibonacci Retracement level at 393p. On the other hand, a move above the resistance at 435p will invalidate the bearish outlook.

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