BP plc BP will no longer phase out its energy transition strategy as investors have been expressing disapproval of the company veering away from its extensive plan to diminish hydrocarbon production, per a Reuters report.

BP’s CEO Bernard Looney outlined ambitious plans for the British energy giant to achieve net-zero emissions by 2050 and invest billions in low-carbon energy.

Earlier this year, BP scaled down plans to reduce hydrocarbon production after soaring prices lifted the company’s profits to multi-year highs. BP is the only major oil company seeking to reduce production by the end of this decade.

BP relies heavily on oil and gas as its primary source of revenue, with a substantial margin. However, BP will not further slow its shift away from hydrocarbons. BP plans to invest $55-$65 billion in its new transition businesses, including EV charging, biofuels, hydrogen, wind and solar energy, by 2023-2030.

Amid heightening climate concerns, the world is on a decarbonization mission. This has resulted in a significant shift toward renewable energy sources, which are becoming increasingly crucial in battling carbon emissions. Renewable energy offers a more sustainable alternative to traditional fossil fuels.

Looney dismissed the criticism from investors who argue that BP’s aggressive spending on low-carbon fuels and renewables yields returns far inferior to those of hydrocarbons in the current market. BP is planning to grow in sectors, which will not be correlated to the oil price.

Renewables and low-carbon constitute a small portion of the company’s revenues. In the first half of 2023, the transition growth engines accounted for $700 million of $23 billion in core BP earnings. Looney expects the transition businesses’ earnings to increase to $3-$4 billion by 2025 and $12 billion by 2030.

Price Performance

Shares of BP have outperformed the industry in the past three months. The stock has gained 11.2% compared with the industry’s 8.1% growth.

Zacks Rank & Stocks to Consider

BP currently carries a Zack Rank #5 (Strong Sell).

Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy).

Core Laboratories N.V.’s CLB strong presence in the emerging shale plays and its global footprint will provide for steady growth rates, going forward. CLB’s technology-heavy portfolio of proprietary products and services gives it the opportunity to optimize production from new and existing fields.

Core Labs has witnessed upward earnings estimate revision for 2023 and 2024 in the past 60 days. The consensus estimate for CLB’s 2023 and 2024 earnings per share is pegged at 87 cents and $1.17, respectively.

Global Partners GLP is a leading operator of gasoline stations and convenience stores. Over the past 60 days, GLP has witnessed upward earnings estimate revisions for 2023 and 2024, respectively.

The Zacks Consensus Estimate for Global Partners’ 2023 and 2024 earnings per share is pegged at $3.46 and $3.69, respectively. GLP currently has a Zacks Style Score of A for Value and Growth.

Evolution Petroleum Corporation EPM is an independent energy company. EPM has a Zacks Style Score of A for Growth and B for Value.

Evolution Petroleum has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for EPM’s 2023 and 2024 earnings per share is pegged at $1.16 and $1.08, respectively.
BP p.l.c. (BP): Free Stock Analysis Report

Core Laboratories Inc. (CLB): Free Stock Analysis Report

Global Partners LP (GLP): Free Stock Analysis Report

Evolution Petroleum Corporation, Inc. (EPM): Free Stock Analysis Report

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