I reiterate my forecast of $40/sh by end of July. My rationale is as shown: (1) BP has received a number of upgrades, (2) 2Q earnings will beat estimates given solid company 2Q delivery, (3) oil price will hold c$50/sh which in turn will demonstrate that dividends are safe.
Sentiment: Strong Buy
At this pace we may get to $40/sh a bit sooner...see list of upgrades from last week's BP presentation in Baku, Azerbaijan:
Morgan Stanley Martijn Rats Buy (Upgrade) 485 (+15%) Dividend de-risked. BP is climbing in our order of preference as it offers an increasingly attractice combination of divident yield, stock appreciation and dividend cover.
UBS Jon Rigby Buy (Upgrade) 445 (+11%) Upstream focus clearly emphasises sustainability of financial frame.
Citi Alastair Syme Buy (Upgrade) 410 (+11%) Simpler, better, cheaper - Upgrade to Buy. Azb presentation highlights sustainable gains.
Barclays Lydia Rainforth Buy 565 Approaching a sweet spot. BP's field trip tp Azb exceeded our already high expectation.
HSBC Gordon Gray Buy 480 Strong stable outlook in the context of global uncertainty.
Bernstein Oswald Clint Buy 480 BP is back and should be part of everyone core holdings.
BMO Brendan Warn Buy 450 Reiterate Outperform. Detailed investor briefing has confirmed our view that BP's portfolio is ideally positioned
Sentiment: Strong Buy
Yes, it sounds like a bold statement, but 2Q is finished and the score card will be fantastic. Costs are way down below earlier forecasts and production above industry estimates. Additionally, BP is being intellegint about its street deals and very well prepared to hold its dividends. The street is smelling a good deal and BP should be selling at 4-5% dividend yield, i.e., a $50/sh stock. Granted, it will take some time given its Macondo hang over, but $40/sh is a sure thing for a company that is delivering top notch performance.
Since the dollar is strenghtning against all major currencies, BP will benefit somewhat. Note that other oil Companies are also global. BP's large UK work force should benefits at a slightly higher proportion.
This is a big win for BP, the other side was seeking $2.5b. the settlement of $175m is pocket change for BP.
BP should be heading towards $34/sh, as we will learn the Fed April's meeting notes to indicate lower for longer and oil prices breaking the $50/b mark by next week. The phycological point will boost IOCs shares and BP is clearly undervalued. As we look into 2H/16 with oil stabilizing in the $55-$65/b, BP has the potential to reach $38-$42/s. At this levels, the companies dividends are saved and new large investments will likely be announced. New areas of explorations are also likely to emerge such as Mexico, Iran and new assets acquisitions at distressed prices in West Africa. I see 2016, as a key turning point of the firm.