Proactiveinvestors recommends
Additional Information
Market: NYSE LSE
Sector: Oil & Gas Exploration & Production
EPIC: BP.
1 year chart
digital-look imported chart image
1 day chart
digital-look imported chart image
BP
www.bp.com

BP is an international oil and gas company with operations in more than 80 countries, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products

Full BP profile here
Pdf

BP could see turnaround if it can put Macondo ghost to rest, says broker

23rd May 2012, 6:46 am by Jamie Nimmo
BP has been forced to sell off assets since to cover the costs of the Macondo disaster. BP has been forced to sell off assets since to cover the costs of the Macondo disaster.

Oil giant BP (LON:BP) could see a share price revival if it can make progress on US Macondo-related fines, according to Canaccord Genuity.

The stock has returned to levels seen in the aftermath of the Macondo oil spill. But Canaccord analysts think the recent weakness “leaves valuations discounting very little upturn in BP fortunes”.

The broker has upgraded the company to ‘buy’ from ‘hold’ but has reduced its target price by 30 pence to 485 pence to factor in longer-term growth concerns.

The FTSE 100 heavyweight owes billions of dollars in fines and compensation for the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, which killed 11 workers and leaked millions of barrels of crude oil into the water.

The company has been forced to sell off assets since to cover the costs.

And Canaccord sees the settlement of the fines and further sales as catalysts for a share price recovery in the future.

While the broker is not convinced about the scope for longer-term growth at BP, it predicts a “strong recovery” over the next couple of years.

The broker said: “We think current sentiment leaves room for good upside in the case of material progress on issues such as a US settlement over fines, or further disposals.”

“BP still has the uncertainty over Macondo, but we think this is an attractive valuation for a European oil stock with limited Eurozone exposure.”

The broker now sees more value in the sector given its underperformance so far this year.

It added that with Brent Crude Oil prices falling back below US$110 per barrel, it is more comfortable on the downside risks.

Although the broker expects exploration and production results to weaken in the short-term due to high summer maintenance, this is now well flagged in the price.

Analysts are highlighting the fourth quarter of this year as a potential starting point for “a more visible upstream recovery”.

However, the broker was less optimistic longer-term.

“We think the longer-term outlook is one of limited volume growth (sub-1 per cent pa) and much higher capex, albeit with good potential for exploration catalysts.

“While this makes us somewhat cautious on the shares’ long-term prospects, we think they could perform well on a 6-12 month view,” the broker concluded.

Shares sank 6.3 pence, or 1.8 per cent, today to stand at 395.7 pence in London trading.

No investment advice


Proactive Investors North America Inc, trades as "Proactiveinvestors USA & Canada".


You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.


You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.


From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.


You understand that we may be providing advertising and/or marketing services to companies mentioned on the site. A full list of companies that are paying for services from us, or our affiliated companies in the UK and Australia can be viewed here