The Zacks Analyst Blog Highlights: BP, Royal DutchShell, EniSpA, Total and Dollar Tree
For Immediate Release
Chicago, IL – May 31, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include BP Plc (BP), Royal DutchShell (RDS.A),EniSpA (E), Total SA (TOT) and Dollar Tree Inc. (DLTR).
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Here are highlights from Wednesday’s Analyst Blog:
BP to Resume Exploration in Libya
British energy major BP Plc (BP) plans to resume its Libyan exploration operations, which were stalled last February due to civil unrest. The restart of operations, however, depends on security conditions.
BP has withdrawn the Force Majeure relating to its Libyan Exploration and Production Sharing Agreement (:EPSA), which was signed with the state-owned National Oil Corporation. The deal came into effect on May 15, 2012. Force Majeure exempts both parties from any obligation to accomplish commitments like drilling due to an occurrence outside one’s control.
At the time when BP plans to resume operations in Libya, its rival Royal Dutch Shell (RDS.A) is exiting operations at two blocks in the region.
The improving economic and political situation has encouraged several companies to return to Libya. However, Shell’s exit is due to poor results of an extensive seismic and drilling campaign in its licenses where further exploration is not economically feasible.
Currently, BP has no production in Libya. Since the company’s EPSA deal was sanctioned in December 2007, BP has purchased over 31,000 square kilometers of 3D seismic offshore in the Sirt basin and onshore in the Ghadames basin. Per the contract, BP is responsible for the drilling of five offshore and 12 onshore wells.
Per the OPEC oil cartel, Libya holds oil estimated at 47 billion barrels, which is world’s ninth largest reserve. Other major companies like – Eni SpA (E) and Total SA (TOT) have also commenced operations in the region.
However, in recent times, foreign companies have been reluctant to continue operations in the north African country due to tough contracts and constant insecurity. The repeated attack on oil officials also discourages companies from setting up operations in the region.
BP holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation on the stock.
Dollar Tree to Split 2-for-1
Leading discount stores operator, Dollar Tree Inc. (DLTR) announced its intention to split its common stock to improve its liquidity while also enhancing shareholder value. Per the split announcement, the company will distribute two shares to shareholders for every single Dollar Tree share held as of the close of business on June 12, 2012.
The new shares under the 2-for-1 stock split will be distributed as a stock dividend on June 26, 2012. This will increase the company’s total shares outstanding to 232 million shares from the current (pre-split) outstanding shares of 116 million.
Dollar Tree’s stock split announcement reflects the company’s commitment to enhance long-term value for shareholders. On the other hand, the stock dividend will also enhance the company’s liquidity. Moreover, it will provide avenues to enter new positions at attractive prices while boosting the demand for the company’s shares, and ultimately broadening its shareholder base.
Additionally, the company’s strong free cash flow generation signals an enhanced share buyback program, as the company, apart from stores growth, uses majority of free cash flow to buyback shares. Further, the company’s recently announced accelerated share repurchase program reflects management’s continued confidence in the business and the consistency of its cash flow generation.
Dollar Tree ended first-quarter 2012 with cash and cash equivalents of $382.3 million compared with cash balance of $371.3 million at the end of the prior-year quarter. The company had no outstanding long-term obligations as of April 28, 2012. Merchandise inventories were up 13.5% year over year to $875.0 million. In the first quarter of 2012, the company spent $65.4million on capital expenditure.
We believe the company is doing a commendable job internally of managing controllable inputs, including reducing stem miles while increasing back-haul opportunities. The company continues to generate robust same-store sales growth, which reflects its focus on low-priced wants and needs commodities. The rise in comparable sales is attributable to increased traffic, reflecting continued top-line growth.
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