BP (LON:BP) has announced new production units in the Gulf of Mexico, enhancing its status as the area’s biggest producer, Reuters has reported. The move follows the blue-chip oil major’s first-quarter results last week which saw the company post a fall in profits for the first three months of the year amid weaker crude prices.
BP’s share price has fallen deep into the red in London this morning, having given up 1.13 percent to 541.90p as of 09:00 BST. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.22 percent lower at 7,364.62p. The group’s shares have given up a little over two percent of their value over the past year, largely in line with the Footsie.
Gulf of Mexico spending
Reuters reported yesterday that BP will add two new subsea production units about two miles (3.2 km) south of its existing giant Thunder Horse platform in the Gulf of Mexico, with two wells added in the near term and eight total wells planned. The company, however, has not disclosed the cost of investment.
People familiar with the oil major’s investment decisions told the newswire that the Gulf’s vast oil reservoirs and increasingly affordable platforms make the formation a good hedge against the risks of shale, where industry’s per-well productivity has dropped by 14 percent from its 2016 high. The newswire further quoted analysts as commenting that among deepwater basins, the Gulf of Mexico’s reliable regulatory climate makes the region particularly attractive.
Analysts on oil major
Societe Generale, which rates the FTSE 100 company as a ‘buy,’ lowered its target on the BP share price from 650p to 635p last week, while Credit Suisse reaffirmed the company as an ‘outperform,’ valuing the stock at 640p. According to MarketBeat, the blue-chip group currently has a consensus ‘buy’ rating and an average price target of 650.88p.