BofA Upgrades BP

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Bank of America/Merrill Lynch analyst Alejandro Demichelis boosted his rating on BP to ''buy,'' saying Europe's second-largest oil company is undervalued on a net asset value basis and that the stock may have upside potential of 31%. BP's U.S.-listed shares gained 1.43% today.

BP (BP) trades at a 50% discount to its net asset value, versus an average of 23% among its peers, Barron's reported. Demichelis notes that BP still faces risk in the form of Gulf of Mexico spill liabilities, but the analyst also said that much of that liability is currently priced into the stock.

Regarding the collapse of BP's deal with OAO Rosneft, Russia's largest oil company, the analyst said ''We nonetheless see a resolution of this situation either way as a positive. In our view, if BP does manage to revive the deal this achieves the strategic aim of entering the Arctic, reducing uncertainties. If BP walks away from it, this calls the strategy into question, putting pressure on management to explore more drastic strategic avenues to crystallise value.''

The analyst also cites BP's progress in Australia, Angola and Brazil as potential positives that can help the company outside of the Gulf of Mexico.