BP Is a Strong Buy

BP (BP) has uniquely achieved cash cost minimization of about $7 billion till 2017 compared to 2014. The remaining organic supplies and expenses of cash are estimated to be at nearly $60 per barrel by 2017 and further delivering significant free cash flow expansions.

BP p.l.c. announced fourth quarter ended December 31, 2015 underlying replacement cost profit of $196 million, down 91 percent year-over-year from $2.2 billion during the same period last year.

BP declared fourth quarter of 2015 underlying operating cash flows of $5.9 billion, making the net cash flows for the complete fiscal year 2015 to $20.3 billion, a year-over-year decline of 38 percent compared to $32.8 billion in the fiscal year 2014.

The integrated upstream and downstream oil and gas company reported continued year-over-year decline in both its underlying replacement cost profit and cash flow from operations primarily driven by the ongoing weaker global commodity demand and pricing environment coupled with the rising exploration costs, eating into the margins of the company.

Impressive moves

The integrated oil and gas exploration company has recently completed the notable $10 billion of key divestment program declared during October 2013 and targets an additional $3 billion to $5 billion of key divestments in 2016 and further $2 billion to $3 billion worth of divestments, going forward into 2017 and further.

BP is focused on sustaining solid free cash flow levels by minimizing the non-core expenses while continuously divesting its non-strategic assets to further generate enough cash flows useful for prospective company growth, daily operations coupled with executing superbly on its commitment to deliver improved shareholder returns.

The long-lasting recessions in the US, China and Europe are projected to notably bring down the international oil demand growth during 2016, to approximately 1.2 mb/d after having remained at the peak for a five-year peak of 1.6 mb/d during 2015.
The global crude oil prices declined further in January, with packed supplies pushing worldwide benchmark indices below $30/bbl. The OPEC crude oil production is projected at 32.7 mb/d since February 2016, going forward and primarily driven by notable production ramp ups of Iran and Iraq. In addition, oil demand expansion bullishness driver includes achieving notable growth push from the global fall of oil prices much below $30/bbl.

The global crude oil prices have declined by more than $60 per barrel in the period ranging from September 2014 till December 2015 and going forward into 2016, these pricing fundamentals are projected to remain weak in the short-term and suggesting that global crude supply is believed to match its demand during the other half of the current year.

The worldwide oil supply is estimated to match its demand over a longer term with a majority of the OPEC and non-OPEC nations projected to continue to decrease crude production, matching its ongoing depressed demand which is further expected to improve the crude prices.

The Board of Directors at BP p.l.c. recently declared fourth quarter of 2015 cash dividend per ordinary share and cash dividend per ADS of US$0.10 and US$0.60 respectively and in line with its continued commitment to deliver attractive shareholder returns.


Overall, the investors are advised to buy BP p.l.c. considering significant growth prospects of the company, primarily driven by the ongoing slow but steady improvement in the global commodity demand and pricing environment. Further, BP has weaker financial position with significant total debt of $53.17 billion against weaker total cash position of $26.61 billion only, restricting the company to continue with its daily operations profitably. The profit margin of -2.91% depicts no profit but loss over the short-term.
Published on Mar 16, 2016
By Yaggyaseni Mittra

Copyrighted 2020. Content published with author's permission.

Posted in ...