Goldman Sachs downgrades Aker BP to “sell” on capex strain, oil price risk
Investing.com -- Goldman Sachs downgraded Aker BP (OL:AKRBP) to “sell” from “neutral,” warning of increased financial pressure over the next two years amid a weakening macro outlook.
The 12-month price target remains unchanged at Nkr 230, implying 9% downside from current levels.
Analysts at Goldman said the company’s high exposure to oil prices and heavy capital commitments make it vulnerable if crude weakens, as forecast.
Aker BP has the highest beta to Brent among European exploration and production firms.
Goldman’s Brent estimates for 2025 and 2026 are $64/bbl and $65/bbl, 6% and 4% below consensus, respectively.
As a result, the bank’s earnings forecasts for Aker BP are 17% and 18% below consensus for those years.
The company has hedged just 15% of its oil exposure for the remainder of 2025 through put options at $65/bbl.
That compares with higher hedge coverage by peers, including Ithaca Energy (LON:ITH) at 29% and Harbour Energy at 29% for 2025 and 23% for 2026. Goldman said this leaves Aker BP more exposed to price volatility.
Spending is set to rise sharply. Aker BP guided for 2025 capex of $5.5–6 billion, including $0.2 billion in carryover from 2024 and costs linked to the East Frigg discovery, now part of the Yggdrasil development.
The addition raises estimated project volumes from 650 million to 700 million barrels of oil equivalent, and total resource ambition for Yggdrasil to over 1 billion barrels.
Goldman expects the company’s financial leverage to increase through 2026 due to these capital demands, ahead of projected production growth in 2027.
While Aker BP’s portfolio remains operationally strong, with low costs and emissions, analysts said near-term financial strain overshadows these strengths.
The longer-term outlook also includes a shift toward gas. Aker BP expects gas to make up around 20% of its output by 2028, up from 12% in 2024, mainly due to Yggdrasil’s ramp-up.
But Goldman sees a bearish cycle ahead for European gas prices beginning in 2027, driven by LNG supply growth starting in 2025.
Despite strong production in the first quarter and Brent prices holding above $65/bbl, Aker BP has outperformed peers by 5% year to date.
However, the stock now trades at a 23% premium on EV/2P reserves and a 55% premium on 2025 EV/DACF versus the sector.
Goldman said these valuations are no longer justified given the company’s elevated risk profile.
Johan Sverdrup, one of Aker BP’s key assets and among the lowest-cost oilfields globally, remains a cornerstone of its output.
Equinor recently said 2025 production there should remain steady. Aker BP also plans a final investment decision on Phase 3 of the field in the second quarter.
Still, Goldman said these positives are outweighed by near-term risks and reiterated a more cautious stance.
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