We maintained our Neutral recommendation on
) on Jan 7, 2014. BP's position in the Woodford, Haynesville,
Fayetteville, Eagle Ford and Utica shale plays, in association
with its vast resource base and profound knowledge in
unconventional gas, will aid its natural gas in the future.
However, headwinds from a number of global macro issues, such as
sovereign debt risks, defaults on sovereign credits and changes
in U.S. policies, are concerns for the British oil major. BP
carries a Zacks Rank #3 (Hold).
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BP has a strong pipeline of projects and expects four additional
upstream ventures to commence by the end of 2013. Five more
project start-ups - Na Kika 3, Kinnoull, CLOV, Sunrise 1 and Mars
B - are expected in 2014.
Altogether, BP has about 50 major assignments through the decade.
Of these, 11 involve more than $10 billion in total cost. BP's
organic capital expenditure is estimated at $24 billion to $27
billion annually from 2014 until the end of the decade, while
offloading non-core $2-$3 billion worth of assets annually. BP
reiterated its target of growing operated cash flow by over 50%
The company's Whiting refinery has been upgraded to process more
Canadian heavy crude. It is expected to generate over $1 billion
in annual cash flow. The company also continues to expect its U.S
refining system to deliver superior performance as it wraps up
its re-positioning after the sale of Texas City and Carson.
During 2013, the company plans to drill 15-20 explorations wells,
up from 9 in 2012. The company has already completed 4 wells in
Brazil, North Sea and India, with 11 more exploration wells
underway in the Gulf of Mexico (GoM), Brazil, Angola, Egypt,
Jordan, India and Indonesia. BP's upstream spending budget of
$2.5-$3 billion in 2013 has also doubled over the last few years.
However, BP projected full-year 2013 production level to be lower
than 2012 due to the impact of divestitures. For the fourth
quarter of 2013, the company expects production to remain flat
sequentially following the major turnaround activity and repairs
in high-margin North Sea, planned maintenance in Alaska as well
as the effect of the ongoing divestiture program. For 2013, BP
expects refining margins to experience a downfall from the 2012
level due to turnaround activity.
Stocks That Warrant a Look
While we expect BP to perform in line with its peers, one can
consider Zacks Ranked #1 (Strong Buy) stocks
Harvest Natural Resources Inc.
Cheniere Energy Partners L.P.
Helmerich & Payne, Inc.
) as good buying opportunities for the short term.