Wells Fargo bullish on BP, downgrades Exxon Mobil amid valuation gap

Investing.com -- Wells Fargo upgraded BP to Overweight and raised its price target to $57 from $48, while downgrading Exxon Mobil to Equal Weight with an unchanged $182 target in a new note to clients.

Analyst Sam Margolin said relative valuations are “converging in BP's favor,” helped by faster debt reduction and resource development.

U.K. oil majors trade at nearly half the 2027 enterprise value to EBITDA multiple of their U.S. peers, Margolin noted. That gap has historically preceded 12-month outperformance by the U.K. group.

The analyst expects BP's valuation to catch up as its balance sheet is transformed following the Castrol sale, alongside strong oil and gas trading results.

Wells Fargo sees BP's financial debt at about $6.2 billion by the end of 2026, falling rapidly in the second half on Castrol proceeds and cash flow.

Margolin had previously rated BP Equal Weight because of cash outflows from leases, hybrids and environmental liabilities.

BP has described its oil trading as exceptional or better this year. With dated Brent back near $120 a barrel, volatile diesel spreads and wide gas spreads, Margolin sees scope for continued strong trading.

On Exxon, he said the company has operated reliably in 2026 despite timing-related and external setbacks, including damage in Qatar.

He expects fewer disruptions ahead, but sees more upside in BP and said Exxon's premium could compress.

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