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Why Analysts Have Mixed Opinions on BP

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BP stands in bottom two

BP (BP) is one of the two integrated energy stocks that has less than 60% “buy” ratings. ExxonMobil (XOM) is in the same boat with 23% of the analysts giving it a “buy” rating. Now we’ll look at BP, which has the fifth largest market cap of around $142 billion.

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Analyst ratings for BP

As the graph above shows, six (or 55%) out of 11 analysts covering BP recommend a “buy” in May. Another four analysts (or 36%) have recommended a “hold,” and one analyst has recommended a “sell.” In the past year, BP’s mean target price has risen 6% to $50 per share. The target implies around a 20% gain from the current level.

Why analysts have mixed opinions about BP

Analysts’ opinion on BP is divided likely due to its strong upstream portfolio but weaker financials. The company has a robust upstream projects pipeline with 16 key projects expected to start between 2019 and 2021. The company expects about 900 thousand barrels of oil equivalent per day of the new production, net to BP, by 2021.

However, BP’s debt and liquidity positions weakened in Q1 2019 due to the company’s growth activities via capex and acquisitions. BP’s debt ratio (total debt-to-total capital) of 43% was higher than its peers in Q1 2019. Royal Dutch Shell (RDS.A) and Total’s (TOT) ratios stood at 32% and 33%, respectively. We may still see “hold” and “sell” ratings for BP until the company’s debt ratio falls below the peer average.

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