Earlier this month, Deutsche Bank published a report on major oil companies, detailing how they are still coping with the damages from losses in 2016. The bank, however, rated BP plc (ADR) (NYSE:BP) above the major oil giants like ExxonMobil and Royal Dutch, citing BP’s impressive cash flow and potential. Deutsche Bank raised its price target on BP plc (ADR) (NYSE:BP) and gave a ‘Buy’ rating to the stock. The German bank believes the BP plc (ADR) (NYSE:BP) stock will go up amid the company’s new projects in Egypt, Oman, Trinidad & Tobago, and the U.K. The bank also said that these projects will also increase the investor confidence. The company, according to Deutsche Bank, has sustainable dividends, and they will be augmented by stock buybacks in 2018.
BP plc (ADR) (NYSE:BP) owns 10% and 25% of the Shorouk and Nooros natural gas fields in Egypt. These gas fields are guaranteed to generate huge revenues in the near future.
France based investment firm BNP Paribas recently reiterated its ‘Outperform’ rating on BP plc (ADR) (NYSE:BP) stock.
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BP plc (ADR) (NYSE:BP) says that it will be in a position to cover its capital costs and its dividend payments if oil prices hit at least $60 per barrel. But analysts think that Oil prices can cross the $60 mark only if OPEC extends it deal. The London-based oil company is still recovering from the devastating Deepwater Horizon oil spill of 2010, which marred its finances and ruined its PR.
Several analysts fear that BP plc (ADR) (NYSE:BP) might not be able to keep paying dividends to its shareholders. But we believe otherwise. The company didn’t cut its dividends last year, despite of the fact that its cash flow declined by 40% in the period. The company has about $23.5 billion in cash, and we expect it to generate more than $1.8 billion cash flow in 2017. Hence, there is little chance that BP plc (ADR) (NYSE:BP) will disappoint its shareholders when it comes to dividends.
If we exclude $7.1 billion pre-tax charge related to the 2010 oil spill, BP’s cash flow is $1.8 billion. By 2021, BP plc (ADR) (NYSE:BP) predicts that its cash flow will reach $24 billion based on $55 barrel of oil price estimate.
BP plc (ADR) (NYSE:BP) is also a possible takeover target. Last month, several rumors suggested that ExxonMobil was planning to acquire BP for about $150 billion.