BP (LSE: BP.) shares have been one of the FTSE 100’s standout performers over the past year, rising around 50%. But I keep coming back to one question. Is this rally being driven by higher oil and gas prices, or is the market finally starting to re-rate the stock as its new CEO accelerates the strategy reset and simplifies the business?

The distinction matters. If the shares are rising mainly on the back of a commodity price windfall, the rally could prove difficult to sustain. But if BP is becoming a leaner, more profitable and financially resilient business, I think a sustained re-rating towards 700p could be within reach.

Balance sheet repair

For me, one of the most encouraging developments from the company’s Q3 trading update is progress towards reducing net debt.

Back in February 2025, management targeted net debt of $14bn–$18bn by the end of 2027. That looks to have been achieved a year early with net debt expected to fall from $22.3bn to $13.5bn–$14.5bn in the third quarter.

I think this matters because financial flexibility is crucial in a cyclical industry. When oil prices fall, a stronger balance sheet gives it more room to invest in attractive projects and return cash to shareholders without putting the business under unnecessary pressure.

However, not all this progress necessarily reflects stronger underlying cash generation. Asset sales, changes in working capital and volatile trading conditions have also influenced the company’s financial position. The key question is whether it can maintain net debt within its target range when prices are not so favourable.

How much of the rally is down to oil prices?

Brent crude averaged $96.99 a barrel in Q3, down from $103.85 in the previous quarter. Yet its refining indicator margin jumped from $29.60 to $46.70 a barrel, with BP expecting this to boost its product segment’s result by $1.9bn–$2.1bn.

The company estimates that for every $1 change in Brent crude prices, pre-tax operating profit is impacted by $340m. The same assumption impacts the refining indicator margin by $450m.

I remember what happened in 2022, when soaring energy prices boosted BP’s profits but failed to deliver a lasting share price re-rating. This time, I want to see whether balance sheet repair and a simpler strategy can make the gains more durable.

Could BP shares still hit 700p?

I think there are reasons to believe this time could be different from 2022. At the heart of that is BP’s accelerated strategy reset.

Its US onshore business, BPX, is a key part of the plan, with a target to grow production to around 1 million barrels of oil equivalent a day by 2030. The redevelopment of the giant Kirkuk oilfields in Iraq also offers scope to boost production.

If BP can build a simpler business, cut costs and strengthen its balance sheet, these investments could deliver more resilient cash flows through the cycle. That could persuade investors to value the shares more highly, rather than simply responding to oil price movements.

For me, 700p looks achievable if management delivers. After years of underperformance, I think BP shares are still worth considering.

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Andrew Mackie owns shares in BP.