BP share price: Morningstar lifts fair value estimate

Analysts argue shareholders now have clarity on the future

BP share price: Morningstar lifts fair value estimate

Analysts at Morningstar have raised their fair value estimate on BP (LON:BP), arguing that shareholders now have more clarity on the future, with the US Gulf of Mexico oil spill finally resolved. The upbeat comments come ahead of the energy group’s first-quarter results on May 1.

BP’s share price has jumped in London in today’s session, having added 2.50 percent to 509.10p as of 14:45 BST, outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 1.12 percent higher at 7,306.66 points. The group’s shares have added more than 12 percent to their value over the past year, as compared with about a two-percent rise in the Footsie.

Morningstar upbeat on BP

Morningstar analysts upgraded their fair value estimate for BP from 475p to 500p following the group’s positive full-year 2017 results and higher short-term oil and gas price forecasts.  The analysts pointed to the group’s settlement with the US federal government over the Gulf of Mexico oil spill, noting that while the company remained on the hook for $23 billion, to be paid over the next 17 years, the recognition of a reliable estimate for all remaining liabilities removed a key element of uncertainty for the company.

Morningstar expects that BP should be able to meet its liabilities with proceeds from targeted asset sales of $2 billion-$3 billion per year, which, the analysts “view as a rather low hurdle”.

Other analysts on oil major

Morgan Stanley, which sees BP as an ‘equal weight,’ lowered its price target on the shares from 550p to 505p yesterday, while HSBC, which has a ‘buy’ rating on the shares, boosted its valuation on the stock from 570p to 590p. According to MarketBeat, the FTSE 100 oil major currently has a consensus ‘hold’ rating and an average price target of 550.26p.

As of 15:06 BST, Wednesday, 18 April, BP plc share price is 507.20p.

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