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BP Continues to Gain on Key Projects Amid Oil Spill Woes

We issued an updated research report on BP plcBP on Aug 24, 2018. The British energy giant has a strong portfolio of upstream projects that are expected to fetch significant cash flows. However, the oil spill incident of 2010 in the BP-operated Macondo prospect continues to affect the company.

BP currently carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.

The integrated energy company has been gaining on the back of a strong portfolio of upstream projects. Since 2016, BP has placed 16 key upstream projects online, including Atoll Phase 1 & Shah Deniz 2. The company is yet to deliver three more projects online in 2018. These developments are backing the British energy giant to boost production by 900 thousand barrel of oil equivalent per day (MBOE/D) by 2021.

All the key projects BP has been delivering over the years backed the company to post handsome quarterly numbers. In first-quarter 2018, total production rose 9% year over year to 2.605 million barrels of oil equivalent per day (MMBoe/d). Notably, since the October-to-December quarter of 2010, the first-quarter output has been the highest. Moreover, in the second quarter, total production rose 2% year over year to 2.465 million barrels of oil equivalent per day (MMBoe/d).

On top of that, the integrated energy major continued to return cash to shareholders through buybacks and dividend payments. Through second-quarter 2018, BP spent $80 million on the repurchase of 11 million shares. Notably, after 15 quarters , the British energy giant managed to raise quarterly dividend by 2.5% to 10.25 cents per ordinary share.

The pricing chart of BP looks impressive. The stock has rallied 25.6% over the past year compared with the 15.1% collective gain of the stocks belonging to the industry .

However, the oil spill incident of 2010 in the BP-operated Macondo Prospect is still affecting the company. Although BP has cleared the huge litigation expenses related to the spill, it had to divest some of its best operating properties. The asset sales might hinder BP's future cash generating opportunities, going forward.

Through the first half of 2018, the integrated energy firm made a payment of $2.4 billion, after tax, associated with the oil spill incident in the Gulf of Mexico. For 2018, BP projects total payment to be marginally more than $3 billion.

Stocks to Consider

Better-ranked players in the energy space are McDermott International, Inc MDR , Petroleo Brasileiro S.A. or Petrobras PBR and Helix Energy Solutions Group, Inc HLX . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

McDermott's earnings surpassed the Zacks Consensus Estimate in the last four quarters, the average positive surprise being 101.7%.

Petrobras beat the Zacks Consensus Estimate in three of the past four quarters, the average positive earnings surprise being 10.4%.

Helix Energy's bottom line surpassed the consensus mark in three of the last four quarters, the average positive earnings surprise being 66.7%.

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Petroleo Brasileiro S.A.- Petrobras (PBR): Free Stock Analysis Report

McDermott International, Inc. (MDR): Free Stock Analysis Report

Helix Energy Solutions Group, Inc. (HLX): Free Stock Analysis Report

BP p.l.c. (BP): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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