Analyst Says BP Is Undervalued

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The Benchmark Co. analyst Mark Gilman said in an interview today that shares of BP, Europe's second-largest oil company, may be undervalued. BP's U.S.-listed shares were trading over $60 before the explosion of the Deepwater Horizon rig one year ago today before plunging to $25. BP's ADRs closed at $45.91 today.

Following the Gulf of Mexico oil spill, BP (BP) suspended its dividend and announced it would sell $30 billion in assets to raise cash for liabilities tied to the spill. The dividend has since been partially restored and BP has sold $24 billion in assets, though the company has pledged to sell up to $30 billion.

''We're pretty comfortable that things [at BP] are going in the right direction,'' Gilman said in an interview with Yahoo's Web show ''Breakout'', ''and we're even more comfortable that the market hasn't priced it right yet.'' Gilman added there is room for BP to raise its dividend and that reaction to the potential loss of the Arctic drilling alliance with Russia's OAO Rosneft was ''overblown.''

The analyst said BP is favorite name in the oil space and he recently upped his price target on the stock to $70. On Tuesday, Moody's Investors Service said BP, Anadarko Petroleum (APC) and Transocean could face $40 billion to $60 billion in spill-related liabilities.

Switzerland-based Transocean (RIG), the world's largest provider offshore drilling services, owned the Deepwater Horizon while Texas-based Anadarko held a 25% non-operating interest in the Macondo Well project.

Gilman also said that he expects BP to start applying for new Gulf permits and that he would be surprised if those permits were not approved.