Barclays remains bullish on BP (LON:BP) and peer Royal Dutch Shell (LON:RDSA), naming the former their ‘top pick’. The move comes after Deutsche Bank recently named the company a ‘key buy’ in the European oil 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 0.25 percent to 478.50p as of 14:49 BST, slightly underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.65 percent higher at 7,420.37 points. The group’s shares have added more than six percent to their value over the past year, but are down by some six percent in the year-to-date.
Barclays reiterated its ‘overweight’ recommendation on BP and Shell today, with price targets of 675p and 2,750p, respectively. Sharecast quoted the analysts as telling clients the cash break-even level for the price of oil, or the level needed to cover capex and a full cash dividend, was seen dropping by four dollars in the third quarter to $52 a barrel. For BP, the cash break-even level was expected to fall by $10 to $54 a barrel, against a rolling 12-month level of $72.
The broker also argues that despite the integrated oil sector’s 11-percent underperformance versus the market year-to-date, sector earnings are seen growing by 60 percent year-on-year and 11 percent quarter-on-quarter over the latest three-month stretch, helped in part by the resilience of their refining operations.
Barclays further named BP its ‘top pick,’ noting that it expected the company to commit to delivering the equivalent of a full cash dividend in 2018.
BP is scheduled to update investors on its third-quarter performance on November 1.