Source: Sharecast
Naming the stock as the "best idea" in the global energy sector, the broker said it sees the "risk-reward set up attractively for the stock" moving into 2024.
BP's strategy update early in 2023 outlined plans to hold the core business more stable, while renewable generation growth was de-emphasised on the low carbon front, in favour of areas with greater competitive advantage, like hydrogen, biofuels and capture carbon and storage. This "strategic reset" should allow for higher returns, RBC said.
Meanwhile, the broker said shareholder returns remain attractive, with BP intending to return at least 60% of surplus free cash flow to shareholders via buybacks, in addition to its dividend.
RBC also said that BP's energy trading earnings are currently "underappreciated" by the market, and with commodity volatility expected in 2024 there is "upside optionality".
Looking ahead, the broker said it sees "catalysts on the horizon", like the interim chief executive Murray Auchincloss potentially being confirmed as a permanent fixture, along with a possible credit rating upgrade early in 2024.
RBC has a 625p target price for the stock, suggesting significant upside from the 462.35p level on Thursday, down 0.8% on the day.