BP (LON:BP) received a boost yesterday, as analysts at Deutsche Bank named the company a ‘key buy’ in the European oil sector. The move came as the broker sounded an upbeat note on the sector, arguing that the ‘heavy lifting’ had been done three years on from the collapse in crude prices.
BP’s share price has been steady in London in today’s session, having added 0.28 percent to 447.71p as of 14:46 BST, and outperforming the broader UK market, with the benchmark FTSE 100 index having slipped into the red and currently standing 0.12 percent lower at 7,402.85 points. The oil major’s shares have added just under three percent to their value over the past year, but have given up some 12 percent in the year-to-date.
Deutsche Bank reiterated its ‘buy’ rating on BP yesterday, while lifting its valuation on the shares from 505p to 520p, noting that the oil major was its ‘key buy’ in the European oil sector. The German bank also reaffirmed FTSE 100 peer Shell (LON:RDSA) as a ‘buy,’ hiking its price target on the stock from 2,400p to 2,500p, arguing that European oil companies will be able to cover dividends payments from free cash flow with crude prices at around $50 a barrel next year.
“Three years on from the price collapse and the heavy lifting has been done,” the analysts pointed out, as quoted by Proactive Investors, adding that “capital intensity is collapsing, free cash flow is set to surge and with it corporate flexibility is returning”.
The comments are a boost for BP whose interim performance was weighed down by a hefty writedown in Angola, as well as payments related to the Gulf of Mexico oil spill in 2010, which pressured the company’s net debt.